Please answer all parts. Two construction companies EdilA and EdilB take part in a race contract to build a school. Both can bid 1000, 2000 or 3000. The winner (the lowest offer) builds the school and pays 900 of costs. 1. When both bid the same amount, EdilA wins the contract. Find the Nash equilibrium. 2. Assume instead that when both bid the same, neither gets the contract, and furthermore suffer a penalty of 10. Find the Nash equilibrium. 3. Assume instead that when both bid the same, each builds half the school (but sustains 600 of costs, thus more than half). Find the Nash equilibrium. 4. Under the hypothesis of point 2 assume that EdilB can observe the offer made by EdilA before it makes its offer, and that EdilA anticipates that. Find the Nash equilibrium by backward induction of this sequential game
Please answer all parts.
Two construction companies EdilA and EdilB take part in a race contract to build a school. Both can bid 1000, 2000 or 3000. The winner (the lowest offer) builds the school and pays 900 of costs.
1. When both bid the same amount, EdilA wins the contract. Find the Nash equilibrium.
2. Assume instead that when both bid the same, neither gets the contract, and furthermore suffer a penalty of 10. Find the Nash equilibrium.
3. Assume instead that when both bid the same, each builds half the school (but sustains 600 of costs, thus more than half). Find the Nash equilibrium.
4. Under the hypothesis of point 2 assume that EdilB can observe the offer made by EdilA before it makes its offer, and that EdilA anticipates that. Find the Nash equilibrium by backward induction of this sequential game.
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