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A selfless person approaches Jones and Smith wit a $100 bill and offers to sell it to the highest bidder, but both the winning and losing didder must pay her their bids. So if jones bids $2 and Smith bids $1 they pay a total of $3, but jones gets the money, leaving him with a net gain of $98 and smith with -$1. If both bid the same amount, the 100 is split evenly between them. Assume that each of them has only two $1.00 bills on hand, leaving three possible bids: 0, 1, or 2 dollars. prepare out the payoff matrix for this game, and then find the Nash equilibrium.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M963814

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