Problem 1 (6 pts) Andrew and Beth are bargaining over $20,000. They decide to play the...
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Problem 1 (6 pts) Andrew and Beth are bargaining over $20,000. They decide to play the following game. Independently of each other, they write on a piece of paper how much of the pot they want for themselves. Say Andrew's amount is n and Beth's amount is n. If these are compatible, meaning n +nB 20,000, then they each receive what they want. Otherwise (n+ng> 20, 000), both Andrew and Beth get zero. a. Draw a graph with n on the horizontal axis, and ng on the vertical axis. Represent Andrew and Beth's best responses on that graph. b. Looking at the graph above, what are all the Nash equilibria of this game? c. Comment on how satisfactory the NE is in this case as a solution concept. Does it tell us much about what outcome to expect to see? Problem 1 (6 pts) Andrew and Beth are bargaining over $20,000. They decide to play the following game. Independently of each other, they write on a piece of paper how much of the pot they want for themselves. Say Andrew's amount is n and Beth's amount is n. If these are compatible, meaning n +nB 20,000, then they each receive what they want. Otherwise (n+ng> 20, 000), both Andrew and Beth get zero. a. Draw a graph with n on the horizontal axis, and ng on the vertical axis. Represent Andrew and Beth's best responses on that graph. b. Looking at the graph above, what are all the Nash equilibria of this game? c. Comment on how satisfactory the NE is in this case as a solution concept. Does it tell us much about what outcome to expect to see?
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