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Consider a procurement auction involving one buyer and two suppliers of an intermediate good. The buyer will pay $10M to the supplier who offers better

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Consider a procurement auction involving one buyer and two suppliers of an intermediate good. The buyer will pay $10M to the supplier who offers better quality. Quality is on a continuous scale of 1 to 10. For each supplier, the cost of delivering quality X is X million dollars (e.g. if the quality is 5, it costs the supplier $5M). If there is a tie (qualities are equal), then the buyer will split the contract between the two suppliers (each gets $5M, and their costs are X/2 million dollars). Let X1 denote Supplier 1's quality, and let X2 denote Supplier 2's quality. Suppose that bids are submitted sequentially \"in secret," i.e. Supplier 1 bids first, and Supplier 2 bids second, but does no know what Supplier 1's bid was. Is X1 = X2 = 10 still the only Nash equilibrium? 0 Yes, since it is formally the same game: unobserved moves are like simultaneous moves. O No, Supplier 1 has an advantage and will win the auction in equilibrium. O No, Supplier 2 has an advantage and will win the auction in equilibrium. O No, because the suppliers can now coordinate and tie with lower quality and higher payoffs. ls X1 = X2 = 10 still the only Nash equilibrium if bids are submitted sequentially and observed, i.e. Supplier 1 bids first, and Supplier 2 then gets to respond with their bid? (Assume no further counteroffers are possible.) O No, in that case Supplier 1 will set the lowest quality possible, i.e. X1 = O. O X1 = X2 = 10 is no longer a Nash equilibrium, but there is a now a mixed-strategy Nash equilibrium where each supplier sometimes bids more than X = 10 and sometimes bids less. 0 X1 = X2 = 10 is still a Nash equilibrium, but there would be multiple Nash equilibria because Supplier 1 knows that Supplier 2's best response is to match or beat Supplier 1's bid; therefore, Supplier 1 has many best strategies that all yield zero payoff. O X1 = X2 = 10 remains the only Nash equilibrium; in every other situation, one of the suppliers is not behaving optimally for the same reasons as before

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