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In a study conducted at the economic laboratory, Person A is randomly paired with another participant, Person B.
The pairing is anonymous, meaning that none of the participants will ever know the identity of the other participant
with whom he or she is paired.
In the experiment, Person A and Person B will each make a choice. The experimenter will record these choices and then inform both individuals of the choices made by the other.
They will receive a payment based on the choices they made. Additionally, both
will receive a small participation fee. Suppose that neither Person A nor Person B will receive any other money for participating
in the experiment.
Person A must choose between two actions: action A1 and action A2. Person B must choose between two actions: action B1 and action B2. Individuals decide their actions simultaneously.
The actions that the individuals choose will determine how much money Person A and Person B will earn.
The payments that individuals can receive are determined as follows: