Question: Ann and Bob had their first date. Each either felt romantic chemistry (C) or no chemistry (NC) with the other person. Each person knows his/her
Ann and Bob had their first date. Each either felt romantic chemistry (C) or no chemistry (NC) with the other person. Each person knows his/her own feeling but does not know the feeling of the other person. Assume a common prior belief that the other person felt chemistry with probability Pr(C) =pand no chemistry with probability Pr(NC) =1-p.
Ann and Bob are old-fashioned romantics and they made the following rule after the first date: No texts/calls/DMs. Instead, they can choose whether to appear (A) or not appear (NA) under the USyd Quadrangle clock tower at sunset on the next day. Their payoffs are given as follows:
(From a first-person perspective)
If I felt chemistry (C) and I appear (A) under the clock tower, my payoff is 100 if the other person also appears (A) and -100 if the other person doesn't (NA).
If I felt chemistry (C) and I choose not to appear (NA) under the clock tower, my payoff is -30 regardless of the other person's action (because I won't know anyway).
If I felt no chemistry (NC) and I appear (A) under the clock tower, my payoff is 20 if the other person appears (A) and -20 if the other person doesn't (NA).
If I felt no chemistry (NC) and I choose not to appear (NA) under the clock tower, my payoff is 10 regardless of the other person's action.
Please use this information to answer the following questions.
In the game of two romantics, when p = 0.8, there are how many pure-strategy Bayesian Nash equilibria?
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