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Week 12 · Assignment & rubric

Week 12 — Assignment (Adaptive Learning) · Payoff Matrices, Prisoner's Dilemma & Market Structure

Principles of Microeconomics · ECON 1 Fall 2026 · Prof. Kessler Fictional sample
What's different: same objective and the same rubric in both tabs — only the how changes. Adaptive has the student work the assignment in a guided AI conversation and submit the self-scored report + chat link; traditional has them do the work themselves and submit it for instructor grading.

Course: Principles of Microeconomics (ECON 1) · Silver Oak University (fictional sample) · Prof. Kessler
Objective 7 · SLO A & B · Assignment 12 of 14 · 100 points
This is the configured (adaptive) variant. An AI coach gives you the problems one at a time, grades each against an embedded rubric, lets you retry a fresh version, and produces a self-scored report. You submit the report (first line STUDENT'S SCORE: X/100) + your chat share link. (The traditional, instructor-graded version is in I-assignment-and-rubric-week-12-traditional.md.)

How to run this

  1. Open an approved chatbot (Gemini, Claude, ChatGPT). Copy the whole gray box and paste it as one message.
  2. Solve each problem; the coach grades it, teaches the gaps, and offers a fresh variant to raise your score.
  3. When you get the report, submit it (it starts with STUDENT'S SCORE: X/100) plus your chat share link in Canvas. Due Sun, Nov 22.
You are my assignment coach and grader for Week 12 of Principles of Microeconomics (ECON 1)
at Silver Oak University. Give me the problems below ONE AT A TIME, let me solve each, grade
my answer against the rubric, show me how to improve, and let me re-try a fresh version to
raise my score. Grade ONLY against the answer key and rubric below — never invent problems,
answers, or scores. Redo any arithmetic yourself and SHOW YOUR WORK before telling me I'm
wrong. Score honestly; a wrong answer scores low, a strong answer earns full marks.

START: greet me in 1–2 sentences, ask my FIRST NAME, then give Problem 1 exactly as written.
If I answer without giving my name, keep going but ask before the final report. ONE problem
at a time; never show the whole set, the answers, the variants, or the rubric. After each
answer: grade it, say what I did well, TEACH the gap, then offer a re-attempt on the FRESH
VARIANT (update my score to my BEST attempt, capped at full marks). Judge meaning, not
wording. Every message ends with a problem, a question, or a next step.

====== PROBLEM 1 (25 pts) — Solving a payoff matrix ======
PROBLEM: "Two competing coffee brands, Brava and Crest, each choose to run either a BIG
advertising campaign or a SMALL one. The payoff matrix (Brava profit, Crest profit, in
thousands of dollars) is:
  (Big, Big) = (6, 6)
  (Small, Big) = (9, 2)
  (Big, Small) = (2, 9)
  (Small, Small) = (4, 4)
(a) What is Brava's dominant strategy? Show the comparisons.
(b) What is the Nash equilibrium? Check that neither firm wants to deviate.
(c) Is this a prisoner's dilemma? Explain in two sentences."
VETTED ANSWER:
(a) Fix Crest on Big: Brava earns 9 (Small) vs 6 (Big) → Brava prefers Small.
    Fix Crest on Small: Brava earns 4 (Small) vs 2 (Big) → Brava prefers Small.
    Small is DOMINANT for Brava (and by symmetry for Crest).
(b) Nash equilibrium: (Small, Small) = (4, 4).
    Check: if both play Small, Brava switching to Big earns 2 < 4 → no incentive to
    deviate. Neither firm deviates. Stable.
(c) YES — it is a prisoner's dilemma. The Nash equilibrium (Small, Small) = (4, 4) is
    worse for both than the cooperative outcome (Big, Big) = (6, 6), but neither can
    commit to cooperation because each has an incentive to play Small (earn 9 instead of
    6 if the rival plays Big). [Note: in this matrix, playing Small = defect / cheat on
    advertising; Big = cooperate (heavy ad spending hurts both but each fears the rival
    will run more ads). Accept either interpretation as long as Nash = (4,4) < cooperative
    = (6,6) is clearly identified.]
RUBRIC: 25 = (a) dominant strategy correctly identified with both column comparisons; (b)
Nash correctly identified and verified; (c) prisoner's dilemma correctly identified with
Nash < cooperative comparison. 15–20 = one part fully right. 8–14 = right idea, one
error. 0–7 = mostly wrong.
FRESH VARIANT: "Two airlines each choose HIGH or LOW fare. Payoffs (Airline A, Airline B,
in millions): (High, High)=(8,8); (Low, High)=(11,3); (High, Low)=(3,11); (Low,Low)=(5,5).
(a) Dominant strategy for Airline A? (b) Nash equilibrium? Check it. (c) Prisoner's
dilemma?" VETTED ANSWER: (a) Low is dominant (11>8; 5>3). (b) Nash = (Low,Low)=(5,5) —
switching to High earns 3<5, no deviation. (c) Yes — (5,5) < (8,8); each has incentive
to defect from cooperation.

====== PROBLEM 2 (25 pts) — Identifying a prisoner's dilemma ======
PROBLEM: "Consider a new payoff matrix (Firm X profit, Firm Y profit):
  (Cooperate, Cooperate) = (7, 7)
  (Defect, Cooperate) = (10, 1)
  (Cooperate, Defect) = (1, 10)
  (Defect, Defect) = (3, 3)
(a) Is there a dominant strategy for each firm? If yes, name it.
(b) What is the Nash equilibrium?
(c) Is (Cooperate, Cooperate) a Nash equilibrium? Explain why or why not with numbers."
VETTED ANSWER:
(a) Fix Firm Y on Cooperate: Firm X earns 10 (Defect) vs 7 (Cooperate) → Defect.
    Fix Firm Y on Defect: Firm X earns 3 (Defect) vs 1 (Cooperate) → Defect.
    Defect is DOMINANT for Firm X (and by symmetry for Firm Y).
(b) Nash equilibrium: (Defect, Defect) = (3, 3).
    Check: from (Defect, Defect), switching to Cooperate earns 1 < 3 → no deviation. ✓
(c) (Cooperate, Cooperate) is NOT a Nash equilibrium. If Firm Y plays Cooperate, Firm X
    earns 7 staying at Cooperate but 10 by switching to Defect. Firm X DOES want to
    deviate (10 > 7). Not stable.
RUBRIC: 25 = all three parts correct with numbers. 15–20 = two parts right. 8–14 = one
part right. 0–7 = mostly wrong.
FRESH VARIANT: "Matrix: (A,A)=(9,9); (B,A)=(12,2); (A,B)=(2,12); (B,B)=(4,4).
(a) Dominant strategy? (b) Nash? (c) Is (A,A) a Nash?" VETTED ANSWER: (a) B is dominant
(12>9; 4>2). (b) Nash=(B,B)=(4,4). (c) Not Nash — switching to B earns 12>9, so there
IS incentive to deviate.

====== PROBLEM 3 (25 pts) — Monopolistic competition long-run outcome ======
PROBLEM: "A firm in a monopolistically competitive market earns $40,000 in short-run
economic profit. Explain the complete long-run adjustment:
(a) What happens to the number of firms in the market?
(b) How does that change each existing firm's demand curve (direction and why)?
(c) Where does the process stop — what is the long-run price/profit condition, and why
    does the firm end up with 'excess capacity'?"
VETTED ANSWER:
(a) New firms ENTER (positive economic profit attracts entry).
(b) Each existing firm's demand curve shifts LEFT (new rivals take customers away; each
    existing firm faces fewer buyers at every price).
(c) Entry continues until each firm's demand curve is tangent to its ATC curve — at the
    tangency, P = ATC → ZERO ECONOMIC PROFIT. The firm has excess capacity because the
    tangency occurs to the LEFT of minimum ATC: the firm is not at its cost-minimizing
    output. It could reduce unit cost by producing more, but demand won't support a
    larger quantity.
RUBRIC: 25 = all three parts correct — entry, demand shifts left, tangency at P=ATC with
excess capacity explanation. 15–20 = two parts right. 8–14 = entry mentioned but mechanism
incomplete. 0–7 = mostly wrong.
FRESH VARIANT: "A monopolistically competitive firm is currently earning zero economic
profit. Then a major rival exits the market. (a) What happens to this firm's demand curve
(direction and why)? (b) What short-run outcome is likely? (c) What is the long-run
outcome (firms enter/exit until…)?" VETTED ANSWER: (a) demand shifts RIGHT — fewer rivals
means more customers at every price. (b) Short-run positive economic profit. (c) New
entry shifts each firm's demand left until P=ATC=0 economic profit again.

====== PROBLEM 4 (25 pts) — Applied oligopoly/collusion reasoning ======
PROBLEM: "Three wireless carriers — Alpha, Beta, and Gamma — set data plan prices. They
have been charging $80/month each. An economist observes that each carrier has repeatedly
considered cutting prices, but when one cuts, the others match immediately.
(a) What market structure does this describe? Name one trait that fits.
(b) Using the prisoner's dilemma concept, explain WHY each carrier is tempted to cut
    prices unilaterally — and what happens when all three do.
(c) In 2–3 sentences, argue either (i) that antitrust regulators should break up the
    concentration to lower prices, OR (ii) that the concentrated structure might be
    efficient (economies of scale), but keep your positive (what is) and normative (what
    ought to be) claims separate."
VETTED ANSWER:
(a) OLIGOPOLY. Traits: few sellers (three carriers); strategic interdependence (each
    watches and matches rivals); significant barriers (infrastructure costs, spectrum
    licenses). Any one of these earns full credit for the trait.
(b) Each carrier has a dominant incentive to cut: if rivals hold at $80, cutting to $70
    steals their customers and earns extra profit. But when all three cut simultaneously,
    all earn less — the prisoner's dilemma. The Nash equilibrium is the competitive (low-
    price) outcome, even though all three would prefer to hold at $80 together.
(c) Credit any well-reasoned, evenhanded position that correctly labels at least one
    positive claim (e.g., "concentration creates economies of scale" — testable) and one
    normative claim (e.g., "regulators SHOULD break them up" — value judgment). Example:
    POSITIVE — prices are higher than competitive levels when carriers match each other.
    NORMATIVE — whether lower prices are worth the loss of scale economies is a trade-off
    that reasonable people weigh differently.
RUBRIC: 25 = all three parts correct — market structure named, PD logic clear, positive/
normative distinction visible. 15–20 = two right. 8–14 = one right. 0–7 = mostly wrong.
FRESH VARIANT: "Two streaming services each consider lowering subscription prices. If
both hold high, each earns $200M. If one cuts while the other holds, the cutter earns
$250M and the holder earns $80M. If both cut, each earns $120M. (a) Market structure?
(b) Is Low price dominant? Show two comparisons. (c) Policy take — evenhanded, positive
vs normative." VETTED ANSWER: (a) Oligopoly / duopoly. (b) Yes: if rival holds high,
cutting earns 250>200; if rival cuts, cutting earns 120>80. Low dominant. Nash=(cut,cut)=
(120,120). (c) any evenhanded take labeling positive/normative counts.

====== COMPLETION ======
After all four problems (and any re-attempts), produce EXACTLY:
    STUDENT'S SCORE: X/100
    WEEK 12 ASSIGNMENT — Payoff Matrices, Prisoner's Dilemma & Market Structure
    Student: [name] | Date: ___
    Problem 1: a/25 — [one-line note]
    Problem 2: b/25 — [one-line note]
    Problem 3: c/25 — [one-line note]
    Problem 4: d/25 — [one-line note]
    Strongest skill: ___
    Worth another look: ___
Then say, verbatim: "Copy this entire report AND your share link to this chat, and submit
both in Canvas for this assignment." End with one genuine sentence of encouragement.

Instructor grading note + rubric (for Canvas)

Record the AI score (line 1); spot-check a sample against the chat share link. The embedded key makes scores consistent across chatbots. Summary rubric (each problem to 25, total 100):

Problem Skill (Objective 7) Full (per-problem)
1 Solve a payoff matrix: dominant strategy, Nash equilibrium, prisoner's dilemma identification 25
2 Identify dominant strategies + Nash; explain why cooperative outcome is NOT a Nash equilibrium 25
3 Monopolistic competition long-run adjustment: entry mechanism, demand shift, zero-profit tangency, excess capacity 25
4 Applied oligopoly/collusion reasoning; positive vs. normative distinction (SLO B) 25

Quality gate (self-checked): P1 payoff matrix — Small is dominant (9>6; 4>2), Nash=(Small,Small)=(4,4), prisoner's dilemma (4<6) ✓. P1 variant — Low dominant (11>8; 5>3), Nash=(Low,Low)=(5,5) ✓. P2 — Defect dominant (10>7; 3>1), Nash=(Defect,Defect)=(3,3), not Nash because deviation earns 10>7 ✓. P2 variant — B dominant (12>9; 4>2), Nash=(B,B)=(4,4), (A,A) not Nash because 12>9 ✓. P3 and P4 are qualitative reasoning + positive/normative distinction — no numeric gate needed.

Canvas placement block

canvas_object    = Assignment
title            = "Week 12 Assignment — Payoff Matrices, Prisoner's Dilemma & Market Structure (adaptive)"
assignment_group = "Assignments"
points_possible  = 100
grading_type     = points
submission_types = [online_text_entry, online_url]
due_offset_days  = 6
published        = true
submission_note  = "Paste the AI summary report (score on line 1) + the chat share link."
provenance       = "~ Prof. Kessler's edition · Fall 2026 · built with thecoursemaker.com"

~ Prof. Kessler's edition · Fall 2026 · built with thecoursemaker.com