Question
6.9 Discrete All-Pay Auction: In Section 6.1.4 we introduced a version of an allpay auction that worked as follows: Each bidder submits a bid. The
6.9 Discrete All-Pay Auction: In Section 6.1.4 we introduced a version of an allpay auction that worked as follows: Each bidder submits a bid. The highestbidder gets the good, but all bidders pay their bids. Consider an auction inwhich player 1 values the item at 3 while player 2 values the item at 5. Eachplayer can bid either 0, 1, or 2. If player i bids more than player j then i winsthe good and both pay. If both players bid the same amount then a coin istossed to determine who gets the good, but again both pay.
a. Write down the game in matrix form. Which strategies survive IESDS?
b. Find the Nash equilibria for this game.
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