Question

The table below is the payoff marrix for a simple two-firm game Firms A and B are bidding on a government contract and each f's bid is not known by the other form. Each firm can bid other $14.000 or 55.000 The cost of completing the project for each firm is 53.000 The low bid firm will win the contractat its stated price the high dem wilgot nothing the two bids are equal, the two firms wil split the price and costs evenly The payoffs for each firm under each station are shown in the matrix Abids $14.000 A bids 55.000 Firms share the contra in the contract Bbids $14,000 Payoff to A$5.500 Payoff to A$2.000 Payoff to 335500 Payoff to B-30 Bwin the contact Firms share the contract B bide $5,000 Payoff to A50 Payoff A$1000 Payoff to 12.000 Payoff to $1000 Recall from the most that a Nash equilibrium is an outcome in which each player is maximizing his or her own payoff given the actions of the other players. Is there a Nash equilibrium in this game? Is there more than one Nash equilibrium? OA. There is one Nash equilibrium for both firms to bid 55.000 OB. There is one Nash equilibrium-for both firms to bid $14.000 OC. There are two Nash equilibra for both firms to bid 514 000 and for both firms to bid 5.000 OD. There are two Nash equilibris--for firm A to bid $14.000 and firm B to bid 55.000 and for fimm A to bid 55.000 and firm to bid 514,000. O E. There are no Nash equilibria 2

Answer 1

Table

	Bid 14,000	bid 5000
Bid 14,000	(5500*,5500•)	(2000*,0)
Bid 5000	(0,2000•)	(1000,1000)

QA) option B)

NE: (both bids 14,000)

QB) option B, C, D, E

Total payoff = 5500+5500

= 11,000

Total payoff maximized, so none can be made better off

Both receiving same payoff