Discrete All-Pay Auction: In Section 6.1.4 we introduced a version of an all- pay auction that worked as follows: Each bidder submits a bid. The highest bidder gets the good, but all bidders pay their bids. Consider an auction in which player 1 values the item at 3 while player 2 values the item at 5. Each player can bid either 0, 1, or 2. If player i bids more than player j then i wins the good and both pay. If both players bid the same amount then a coin is tossed to determine who gets the good, but again both pay. a. Write down the game in matrix form. Which strategies survive IESDS? b. Find the Nash equilibria for this game.

Discrete All-Pay Auction: In Section 6.1.4 we introduced a version of an all- pay auction that worked as follows: Each bidder submits a bid. The highest bidder gets the good, but all bidders pay their bids. Consider an auction in which player 1 values the item at 3 while player 2 values the item at 5. Each player can bid either 0, 1, or 2. If player i bids more than player j then i wins the good and both pay. If both players bid the same amount then a coin is tossed to determine who gets the good, but again both pay. a. Write down the game in matrix form. Which strategies survive IESDS? b. Find the Nash equilibria for this game.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

Discrete All-Pay Auction: In Section 6.1.4 we introduced a version of an all-
pay auction that worked as follows: Each bidder submits a bid. The highest
bidder gets the good, but all bidders pay their bids. Consider an auction in
which player 1 values the item at 3 while player 2 values the item at 5. Each
player can bid either 0, 1, or 2. If player i bids more than player j then i wins
the good and both pay. If both players bid the same amount then a coin is
tossed to determine who gets the good, but again both pay.
a. Write down the game in matrix form. Which strategies survive IESDS?
b. Find the Nash equilibria for this game.

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