Consider an example of the prisoner's dilemma where 2 firms are making sealed bids on a highway-construction contract and each firm is allowed to bid either $120million or $130 million. If both firms bid the same price, the job is shared equally and each firm earns half the value of its bid. Otherwise the lowest bidder wins thecontract and receives the full value of its bid (and the other bidder earns zero). The non-cooperative outcome in this situation isO A. both firms bid $130 million.B. one firm bids $120 million, the other firm bids $130 million.C. both firms bid $60 million.D. both firms bid $120 million.O E. both firms bid $65 million.OO

The prisoners dilemma is a standard illustration of a game dissected in game hypothesis that shows…

Answered: ... oth firms bid $130 million. e firm…

... oth firms bid $130 million. e firm bids $120 million, the other firm bids $130 million. th firms bid $60 million. oth firms bid $120 million.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 9MC

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Concept explainers

Explicit and Implicit Cost Analysis

The entire idea of the cost of production or production cost is applied corresponding or we can say that it is related to money cost. Money cost refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factors of production or factor services.

Question

Consider an example of the prisoner's dilemma where 2 firms are making sealed bids on a highway-construction contract and each firm is allowed to bid either $120
million or $130 million. If both firms bid the same price, the job is shared equally and each firm earns half the value of its bid. Otherwise the lowest bidder wins the
contract and receives the full value of its bid (and the other bidder earns zero). The non-cooperative outcome in this situation is
O A. both firms bid $130 million.
B. one firm bids $120 million, the other firm bids $130 million.
C. both firms bid $60 million.
D. both firms bid $120 million.
O E. both firms bid $65 million.
OO

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