Question
Erin needs to buy a used car so that she can drive to class. Sean has a used Audi that he'd like to sell. The
Erin needs to buy a used car so that she can drive to class. Sean has a used Audi that he'd like to sell. The car is worthless to Sean but worth $100 to Erin. Sean makes a take-it-or-leave-it offer to sell the car to Erin for $p. Erin observes Sean's price and chooses to either accept or reject his proposal. If Erin accepts Sean's price, then Sean's payoff is p and Erin's payoff is 100 p. If Erin rejects Sean's offer, then Sean's payoff and Erin's payoff are both 0.
1. Write down the normal form of this game.
2. State the complete set of prices p that are accepted by Erin as the outcome of some Nash Equilibrium (you only need to describe the equilibrium outcomes, not the entire strategy profile).
3. State the complete set of prices p that are accepted by Erin as the outcome of some Subgame Perfect Nash Equilibrium (you only need to describe the equilibrium outcome, not the entire strategy profile).
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