Question: Recall the Fight Game from Module 3. Two players must each choose a level of effort, e, between 0 and 1 without knowing the effort
Recall the "Fight Game" from Module 3. Two players must each choose a level of effort, e, between 0 and 1 without knowing the effort level of the other player, i.e. it is a simultaneous move game. If ei > ej then Player i gets all the surplus, S, and Player j gets nothing. The surplus is given by the function S = 2 - e1 - e2. If ei = ej then the players split the surplus equally. a. Show that the only Nash Equilibrium of this game is ei =ej=1. i. Step 1: show that any pair of strategies where 1 > e1 > e2 is not a NE. You may pick specific numbers for e1 and e2 if you like. (2 marks) ii. Step 2: show that any pair of strategies where 1 > e1 = e2 is not a NE. You may pick specific numbers for e1 and e2 if you like. (2 marks) iii. Step 3: show that 1 = e1 = e2 is a NE. (2 marks) b. What combination of strategies maximizes the surplus? Why is this outcome not attainable in this game? (2 marks) c. What classic game does this most resemble
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
