Consider the following one-shot simultaneous-move game between two players, Emma and David. On a Paris-Montreal flight with Maple Airline, the players found out that they each lost a souvenir that they bought in Paris. They want Maple Airline to compensate them for the loss, even though they cannot supply any evidence about the price they paid for their souvenirs. The players do not know each other, and their identities are hidden so that they will not recognize each other in the future. Maple Airlines rule for compensation is that each player must make a claim between $300 and $500. Let CE denote the claim made by Emma and CD the claim made by David, where $300 CE $500 and $300 CD $500. After the amounts they claimed are entered into Maple Airlines customer service computer, the rules are that Maple Airline will pay each player the smaller of the two amounts, and that the player who claimed the higher amount must transfer $5 to the player who claimed the smaller amount (except when the two claims are equal, in which case they will get the same amount, and no transfer is made between them).

(i) Find a Nash equilibrium of this game, and determine if it is the unique Nash equilibrium. Explain your reasoning.

(ii) Would you predict that the actual outcome of the game will be identical (or very close) to the Nash equilibrium outcome? Explain your reasoning.

(iii) Recall that an equilibrium concept that we covered in our lecture slides is the Kantian equilibrium. Does this game has a Kantian equilibrium? If yes, what is the outcome under the Kantian equilibrium? Is it the unique Kantian equilibrium? Explain your reasoning.