Two mining companies, Red and Blue, bid for the right to drill a field. The possible bids are $ 15 Million, $ 25 Million, $ 35 Million, $ 45 Million and $ 50 Million. The winner is the company with the higher bid. The two companies decide that in the case of a tie (equal bids), Red is the winner and will get the field. Company Red has ordered a geological survey and, based on the report from the survey, concludes that getting the field for more than $ 45 Million is as bad as not getting it (assume loss), except in case of a tie (assume win). 1)Considering all possible combinations of bids, formulate the payoff matrix for the game. 2) Verify: does the game have a saddle point? 3)

Two mining companies, Red and Blue, bid for the right to drill a field. The possible bids are $ 15 Million, $ 25 Million, $ 35 Million, $ 45 Million and $ 50 Million. The winner is the company with the higher bid. The two companies decide that in the case of a tie (equal bids), Red is the winner and will get the field. Company Red has ordered a geological survey and, based on the report from the survey, concludes that getting the field for more than $ 45 Million is as bad as not getting it (assume loss), except in case of a tie (assume win). 1)Considering all possible combinations of bids, formulate the payoff matrix for the game. 2) Verify: does the game have a saddle point? 3)

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

Chapter18: Auctions

Section: Chapter Questions

Problem 4MC

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Tom and Jerry are each given one of two cards. One card is blank, while the other has a circle on it. A player can draw a circle on the blank card or erase the circle on one that has already been drawn. Tom and Jerry make their decision separately and hand in the card at the same time.Nobody wins anything unless the two cards are handed in with one and only one circle on them. The player who hands in the card with the circle receives $20, while the one who hands in the blank card receives $10. Answer the following questions. (1) Represent the game in strategic form.(2) Find the Nash equilibria of the game (in pure strategies).
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Consider a simultaneous move game between a union and a company. If both the parties bargain hard, each would gain nothing. If only one party bargains hard the accommodating party gets a profit of $1 million while the bargaining party gets a $5 million, while if they both accommodate, they each get $3 million. If the union leader has already sent strikers to the picket line before entering negotiations, the union has a. Eliminated half of the strategies of the game b. Forced the firm to choose the best response in the union’s best interest c. Made it in the firm’s best interest to accommodate their requests d. All of the above
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