8.8 Indicate the Bayesian–Nash equilibrium on a best-response function diagram.

Which type of player 1 would like to send a truthful signal to player 2 if it could? Which type would like to hide his or her private information?

In Blind Poker, player 2 draws a card from a standard deck and places it against her forehead without looking at it but so player 1 can see it. Player 1 moves first, deciding whether to stay or fold. If player 1 folds, he must pay player 2 €50. If player 1 stays, the action goes to player 2. Player 2 can fold or call. If player 2 folds, she must pay player 1 €50. If player 2 calls, the card is examined. If it is a low card (2–8), player 2 pays player 1 €100. If it is a high card (9, 10, jack, queen, king, or ace), player 1 pays player 2 €100.

a.

Draw the extensive form for the game.

b.

c.

Solve for the hybrid equilibrium.

Compute the players’ expected payoffs.