Consider the following model of political competition. There is a unit mass of voters, which is uniformly distributed on [0, 1], their location on the interval represents their political preferences. There are two political parties. Each party can create a program, which can be represented as a number xi ∈ [0, 1]. The voters vote for the party which is the closest to their preference. If two parties are located on equal distance from a voter, the voter chooses randomly. Suppose, that the party with the largest number of votes wins the election and gets a prize of 1, the losing party gets 0 and in case of a tie both parties get 1/2.

a. Formalize the game: describe a set of players, actions and the payoff functions.

b. Derive the best responses.

c. Find all pure strategy NE of the game.

Answer rating: 100% (QA)

a The set of players consists of two political parties The actions of ... View the full answer