Question
Players 1 and 2 are bargaining over how to split 10. Each player i names an amount, si, between 0 and 10 for herself. These
Players 1 and 2 are bargaining over how to split 10. Each player i names an amount, si, between 0 and 10 for herself. These numbers do not have to be in whole pound units. The choices are made simultaneously. Each player's payoff is equal to her own money payoff . We will consider this game under two different rules. In both cases, if s1 + s2 10 then the players get the amounts that they named (and the remainder, if any, is destroyed). (a) In the first case, if s1 + s2 > 10 then both players get zero and the money is destroyed. What are the (pure strategy) Nash Equilibria of this game? (b) In the second case, if s1 + s2 > 10 and the amounts named are different, then the person who names the smaller amount gets that amount and the other person gets the remaining money. If s1 + s2 > 10 and s1 = s2, then both players get 5. What are the (pure strategy) Nash Equilibria of this game? (c) Now suppose these two games are played with the extra rule that the named amounts have to be in whole pound units. Does this change the (pure strategy) Nash Equilibria in either case?
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