Question
This is from a game theory in economics course for context: Two players are bargaining over how to split one dollar. Both players write shares
This is from a game theory in economics course for context:
Two players are bargaining over how to split one dollar. Both players write shares they would like to have, 0 s1 1 and 0 s2 1, on a piece of paper and then show them to each other at the same time. If s1 + s2 1, then the players receive the shares they named; if s1 + s2 > 1, then both players receive zero.
(a) What are Player 1's best responses to Player 2's actions 0 s2 1?
(b) What are Player 2's best responses to Player 1's actions 0 s1 1?
(c) Does Player 1 have any weakly dominated strategies in this game? Explain.
(d) Draw the best response diagram.
(e) Find all the pure-strategy Nash equilibria of this game.
(f) Are s1 and s2 strategic complements or substitutes? Explain.
(g) If the game was played sequentially, would Player 1 want to move first or second? Relate your answer to the one you gave in (f).
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