A buyer and a seller each have private information about their own valuations of asingle object that the seller may sell to the buyer. The buyer's valuation, denotedV, and the seller's valuation, denoted v,, are independently drawn from a uniformdistribution on the interval [0, 1]. The buyer names an offer price, Pb (a nonnegativenumber), and the seller simultaneously names an asking price, p, (a nonnegativenumber). If p, < Ps, there is no trade; the payoffs to both the buyer and the seller are0. If p. > Ps, trade occurs at the price p = tp); the payoff to the buyer is v, – pand the payoff to the seller is p- vs.2 (a) Specify the strategic situation as a Bayesian game.(b) Find all the values of a such that the game has a Nash equilibrium in which thebuyer offers æ if v, > r and 0 otherwise, and the seller asks r if v, < x and 1otherwise.(c) (optional) Show that the game has a Nash equilibrium in which the buyer usesthe linear offer price function p(vb)price function p,(v.) = v, +.vr +5 and the seller uses the linear ask%3D

A Bayesian recreation is an extension of a widespread game wherein gamers have incomplete records…

Answered: payoffs

Business

Economics

payoffs

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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