Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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).

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

Understanding Econometrics With Economic Applications

Authors: Dennis Halcoussis

1st Edition

0030348064, 9780030348068

More Books

Students also viewed these Economics questions