Describe this auction as a simultaneous-move game – Business Economics
Queen Elizabeth has decided to auction off the crown jewels, and there are two bidders: Sultan Hassanal Bolkian of Brunei and Sheikh Zayed Al Nahyan of Abu Dhabi. The auction format is as follows: The Sultan and the Sheikh simultaneously submit a written bid. Exhibiting her well-known quirkiness, the Queen specifies that the Sultan’s bid must be an odd number (in hundreds of millions of English pounds) between 1 and 9 (that is, it must be 1, 3, 5, 7, or 9) and the Sheikh’s bid must be an even number between 2 and 10. The bidder who submits the highest bid wins the jewels and pays a price equal to his bid. The winning bidder’s payoff equals his valuation of the item less the price he pays, while the losing bidder’s payoff is zero. Assume that the Sultan has a valuation of 7 (hundred million pounds) and the Shiekh has a valuation of 8. (a) Write down a game table to describe this auction as a simultaneous-move game between the Sultan and the Sheikh. [5 points] (b) Write down all Nash equilibria for this game.
