Two mining companies, Red and Blue, bid for the right to drill a field. The possible bids
Question:
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). (a) State reasons why/how this game can be described as a two-players-zero-sum game [5 Marks] (b) Considering all possible combinations of bids, formulate the payoff matrix for the game. [5 Marks] (c) Explain what is a saddle point. Verify: does the game have a saddle point? (d) Construct a linear programming model for Company Blue in this game. [5 Marks] [5 Marks] (e) Produce an appropriate code to solve the linear programming model in part (d). [5 Marks] (f) Solve the game for Blue using the linear programming model and the code you con- structed in parts (d) and (e) interpret solution
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain