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3. Two mining companies, Red and Blue, bid for the right to drill a eld. The possible bids are $3 15 Million, $ 25 Million,
3. Two mining companies, Red and Blue, bid for the right to drill a eld. The possible bids are $3 15 Million, $ 25 Million, $ 35 Million, $ 45 Million and $ 50 Million. The winner is the company with the higher bid. The two companies decide that in the case of a tie (equal bids), Red is the winner and will get the eld. Company Red has ordered a geological survey and, based on the report from the survey, concludes that getting the eld for more than $ 45 Million is as bad as not getting it {assume loss), except in case of a tie [assume win). (a) State reasons Why/how this game can be described as a two-players-zerosurn game [5 Marks] (b) Considering all possible combinations of bids, formulate the payoff matrix for the game. [5 Marks] (c) Explain what is a saddle point. Verify: does the game have a saddle point? [5 Marks] (d) Construct a linear programming model for Company Red in this game. [5 Marks] (e) Produce an appropriate code to solve the linear programming model in part (d). [5 Marks] (f) Solve the game for Red using the linear programming model and the code you con- structed in parts {(1) and (e). Interpret your solution. [5 Marks]
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