Sotheby’s has acquired a new Rothko painting and it has decided to auction it. There are...

Sotheby’s has acquired a new Rothko painting and it has decided to auction it. There are two anonymous art-lover bidders of the painting, we will refer to them as Bidder A and Bidder B to protect their anonymity. In this auction format, Bidder A and Bidder B simultaneously submit a written bid for the Rothko painting. However, the auction has a weird twist. Sotheby’s requires that Bidder A must submit an odd number (in millions of US dollars) between 1 and 9 (that is, the bid must be 1, 3, 5, 7, or 9) and Bidder B’s bid must be an even number between 2 and 10 (that is, the bid must be 2, 4, 6, 8 or 10). The bidder who submits the highest bid wins the Rothko and pays a price equal to her bid. The winning bidder’s payoff equals his valuation of the item less the price she pays, whereas the losing bidder’s payoff is 0. Assume that Bidder A has a valuation of 7 (million US dollars) and that Bidder B has a valuation of 8 (million US dollars).

a) (10 points) Write down the strategic form of this game.

b) (10 points) Find all of the Nash equilibria of the game you wrote in part a.

Show every step of your calculations

Expert Solution

Rahul Sunny answered 8 months ago

1. Queen Elizabeth has decided to auction off the crown jewels. There are two bidders: the...

1. Queen Elizabeth has decided to auction off the crown jewels. There are two bidders: the Sultan and the Sheikh. Each will simultaneously submit a bid in a sealed envelope; the highest bidder will win, and pay what he bid. (This is a “First Price Auction”.) The Sultan is only allowed to bid an odd number: 1, 3, 5, 7, or 9. The Sheikh is only allowed to bid an even number: 2, 4, 6, 8, or 10. The Sultan...

Your family's house painting business has decided to try this "EOQ thing" you just learned in...

Your family's house painting business has decided to try this "EOQ thing" you just learned in SCMS 3510. So you open the financials and note the following information: Three-year average paint consumption: 2090 gallons per year You use a small warehouse to hold your equipment and paint. From your cost accounting class, you estimate that your holding cost per gallon of paint is $1.65 per year. Buying the materials needed requires more time than you thought. The part-time person whose...

A bank has recently acquired a new branch and thus has customers in this new region....

A bank has recently acquired a new branch and thus has customers in this new region. They are interested in the default rate in their new region. They wish to test the hypothesis that the default rate is different from their current customer base. They sample 200 files in area A, their current customers, and find that 20 have defaulted. In area B, the new customers, another sample of 200 files shows 12 have defaulted on their loans. At the...

A bank has recently acquired a new branch and thus has customers in this new territory....

A bank has recently acquired a new branch and thus has customers in this new territory. They are interested in the default rate in their new territory. They wish to test the hypothesis that the default rate is different from their current customer base. They sample 81 files in area A, their current customers, and find that 48 have defaulted. In area B, the new customers, another sample of 103 files shows 72 have defaulted on their loans. What is...

Panera has recently acquired a new branch and thus has customers in this new territory. They...

Panera has recently acquired a new branch and thus has customers in this new territory. They are interested in the default rate in their new territory. They wish to test the hypothesis that the default rate is different from their current customer base. They sample 93 files in area A, their current customers, and find that 42 have defaulted. In area B, the new customers, another sample of 90 files shows 79 have defaulted on their loans. What is the...

Your friend Tom Smith has decided to expand Smith Sales Company. He has acquired an expansion...

Your friend Tom Smith has decided to expand Smith Sales Company. He has acquired an expansion loan and purchased $500,000 of plant assets as part of the expansion. Tom values your advice and requests your help in properly depreciating the plant assets. Tom has paid you well for your advice and you readily accept the challenge. Explain the different methods that can be used to calculate depreciation including: Straight-line, Double declining balance, Units of production & Sum of years digits.

Wile E. Coyote wants to purchase a new tunnel painting technology ACME has just released into...

Wile E. Coyote wants to purchase a new tunnel painting technology ACME has just released into the market. Wile E. Coyote knows that he will have a steady income flow of $7,000 per month due to TV advertising. Given that this is a new product and that Mr. Coyote is such a loyal customer, ACME is willing to allow Mr. Coyote pay them in full at the end of 24 months. Mr. Coyote estimates that if he saves in its...

Sirius has decided to acquire a new equipment at a cost of $748,000. The equipment has...

Sirius has decided to acquire a new equipment at a cost of $748,000. The equipment has an expected life of 6 years and will be depreciated using 5-year MACRS with rates of .20, .32, .192, .1152, .1152, and .0576 (note that 5-year MACRS depreciation actually takes place over 6 years). There is no actual salvage value. Travis Capital has offered to lease the equipment to Sirius for $153,000 a year for 6 years, with lease payment at the end of...

The lavish carpet manufacturing co. has decided to acquire a new machine that has an economic...

The lavish carpet manufacturing co. has decided to acquire a new machine that has an economic life of 10 years, with no residual value. The machine can be purchased for $75,000 and the supplier is willing to advance $45,000 of the purchase price at 12 percent. The loan is to be repaid in equal instalments over 10 years. Lavish Carpet pays 40 percent corporate income tax and can claim 20 percent capital cost allowances on the purchased asset. It expects...

Mountain Distribution has decided to analyze the profitability of five new customers. The company has the...

Mountain Distribution has decided to analyze the profitability of five new customers. The company has the following activities: Activity Cost Driver Rate Order taking $80 per purchase order Customer visits $80 per customer visit Deliveries $4.00 per delivery mile travelled Product handling $0.85 per case sold Expedited deliveries $335 per expedited delivery. It buys bottled water at $12.20 per case and sells to retail customers at a list price of $14.50 per case. Data pertaining to the five customers are:...

Question