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Question An item is up for auction. Player 1 values the item at 3 while player...

Question An item is up for auction. Player 1 values the item at 3 while player 2 values the item at 5. Each player can bid either 0, 1, or 2. If player i bids more than player j then i wins the good and pays his bid, while the loser does not pay. If both players bid the same amount then a coin is tossed to determine who the winner is, and the winner gets the good and pays his bid while the loser pays nothing.

(a) Write down the game in matrix form.

(b) What will be the Nash equilibrium?

(c) What will be the equilibrium (SPNE) if player 1 bids first?

(d) What if player 2 goes first?

I got (1/2 , 3/2 ) for question b is that correct?

Can Someone help me with b, c and d ?

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Expert Solution

Rahul Sunny answered 1 year ago
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