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Cedric is at a used car dealership. Xu, the car dealer, can choose between showing a blue car, which is a lemon, or a red
Cedric is at a used car dealership. Xu, the car dealer, can choose between showing a blue car, which is a lemon, or a red car, which is in great condition. Cedric can decide to buy the car or not. If Cedric buys the blue car, he gets a payoff of 0 and Xu gets a payoff of 10. If Cedric buys the red car, he gets a payoff of 2 and Xu gets a payoff of 8. If no cars are sold, they both get a payoff of 1. (a) Represent this game in strategic form (table). Find all the Nash Equilibrium in pure strategies. (b) Cedric doesn't know anything about cars. So, he cannot differentiate between a lemon or a good car. Represent the game in extensive form (tree) using the concept of information set. (c) Is this game characterized by perfect information? Why or why not?Cedric is at a used car dealership. Xu, the car dealer, can choose between showing a blue car, which is a lemon, or a red car, which is in great condition. Cedric can decide to buy the car or not. If Cedric buys the blue car, he gets a payoff of 0 and Xu gets a payoff of 10. If Cedric buys the red car, he gets a payoff of 2 and Xu gets a payoff of 8. If no cars are sold, they both get a payoff of 1. (a) Represent this game in strategic form (table). Find all the Nash Equilibrium in pure strategies. (b) Cedric doesn't know anything about cars. So, he cannot differentiate between a lemon or a good car. Represent the game in extensive form (tree) using the concept of information set. (c) Is this game characterized by perfect information? Why or why not
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