Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Each of two sellers has available one indivisible unit of a good. Seller 1 posts the price p1 and seller 2 posts the price p2.

Each of two sellers has available one indivisible unit of a good. Seller 1 posts the price p1 and seller 2 posts the price p2. Each of two buyers would like to obtain one unit of the good; they simultaneously decide which seller to approach. If both buyers approach the same seller, each trades with probability 0.5; the disappointed buyer does not subsequently have the option to trade with the other seller. (This assumption models the risk faced by a buyer that a good is sold out when she patronizes a seller with a low price.) Each buyer's preferences are represented by the expected value of a payoff function that assigns the payoff 0 to not trading and the payoff (1- p) to purchasing one unit of the good at the price p. (Neither buyer values more than one unit.) For any pair (p1; p2) of prices between zero and 1 and such that 2*p1 - 1 < p2< 0.5(1+p1), find the Nash equilibria (in pure and in mixed strategies) of the strategic game that models this situation.

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

Business Law

Authors: Henry Cheeseman

8th Edition

0133130649, 9780133130645

More Books

Students also viewed these Economics questions

Question

Subjective norms, i.e. the norms of the target group

Answered: 1 week ago