Suppose that two people are playing a guessing game with a


Suppose that two people are playing a guessing game with a prize going to the person closest to one-half of the average. Guesses are required to be between 0 and 100 (could be integers or decimals). Show that none of the following are Nash equilibria:

(a) Both choose 1. (Hint: consider a deviation to 0 by one person, so that the average is 1/2, and half of the average is 1/4.

(b) One person chooses 1 and the other chooses 0.

(c) One person chooses x and the other chooses y, where x > y > 0. (Hint: If they choose these decisions, what is the average, what is the target, and is the target less than midpoint of the range of guesses between x and y? Then use these calculations to figure out which person would win, and whether the other person would have an incentive to deviate.)

Request for Solution File

Ask an Expert for Answer!!
Business Economics: Suppose that two people are playing a guessing game with a
Reference No:- TGS01649909

Expected delivery within 24 Hours