Two buyers bid in an auction for a single object. Each can bidany integer amount from $0 to $10. The two bids are madesimultaneously and independently of each other. The buyers’respective values are v1 = 5 and v2 = 10. The bidder with thehigher bid wins (obtains the object) and pays the amount of his ownbid. However, the bidder who does not win the auction and thus doesnot get the object is also obliged to pay half of his own bid. Incase of a tie in the bids bidder 2 wins.
(a) Specify the best responses to pure strategies for bothbidders.
(b) Identify the pure strategy NE of the game.
(c) Find all dominated strategies for each bidder.
(d) Now restrict the possible bids to $4 and $5, and identifyall pure and mixed strategy NE in this game.
