Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A $100 gift card is being auctioned off to Ann and Brandon. Ann has $99 while Brandon has $200. Each bidder will separately write

while Brandons average payoff would be (200 + 100 – 5) + 1 200 Ann gets Brandon gets gift card with probability 0.5 gift car 

A $100 gift card is being auctioned off to Ann and Brandon. Ann has $99 while Brandon has $200. Each bidder will separately write down how much they are willing to pay for the gift card. They cannot bid more money than what they have, and only whole number bids are permitted, i.e., bids can be $0, $1, $2, etc. The highest bidder wins the gift card and pays his/her bid. The lowest bidder gets nothing and pays nothing. If the two bidders tie, they each get the gift card with probability half, in which case the one who gets the card pays his/her bid. For example, if both bid $5, then Ann's average payoff would be 1 (99+1005) + Ann gets gift card with probability 0.5 1 -99 2 Brandon gets gift card with probability 0.5 while Brandon's average payoff would be (200 + 100 5) + Brandon gets gift card with probability 0.5 1 200 Ann gets gift card with probability 0.5 (8 points total) (a) Given a profile of pure strategies (8, 82), what is Ann's payoff U(S, S)? What is Brandon's payoff UB (S1, S2)? (2 points) (b) Show Ann does not have a strictly dominated strategy in this game. (1 point) (c) For Brandon, show that any bid SB 100 is a strictly dominated strategy. (1 point) (d) Is there a dominant strategy equilibrium? (1 point) (e) Derive Ann's (pure strategy) best response function BRA(SB) as a function of Bran- don's pure strategy SB. (1 point) (f) Derive Brandon's (pure strategy) best response function BR(SA) as a function of Ann's pure strategy SA. (1 point) (g) Find all pure strategy Nash equilibria of this game. (1 points)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Accounting

Authors: Gail Fayerman

1st Canadian Edition

9781118774113, 1118774116, 111803791X, 978-1118037911

More Books

Students also viewed these Accounting questions

Question

Draw a picture consisting parts of monocot leaf

Answered: 1 week ago

Question

Why would a company want to eliminate foreign currency risk?

Answered: 1 week ago

Question

What is meant by realization of prots?

Answered: 1 week ago