A selfless person approaches Jones and Smith with a $100 bill and offers to sell

Wednesday July 13, 2022

A selfless person approaches Jones and
Smith with a $100 bill and offers to sell it to the highest bidder but both
the winning and losing bidders must pay her their bids. So if Jones bids $2 and
Smith bids $1 they pay a total of $4 but Jones gets the money leaving him
with a net gain of $98 and Smith with -$1. If both bid the same amount the
$100 is split evenly between them. Assume that each of them has only two $1
bills on hand leaving three possible bids: $0 $1 or $2. Write out the payoff matrix for this
game and then find its Nash equilibrium.


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