Two individuals with diverse interests are bargaining over the distribution of $500 in which payoffs must be in increments of $10. Each player submits a one time bid. If the sum of the bids is less than or equal to $500, each player gets the amount of their bid and the game ends. If the sum of the bids exceed $500, the bargaining ends and the players go home empty handed. This bargaining game:
A) Has a unique Nash equilibrium.
B) Does not have a Nash equilibrium.
C) Has multiple Nash equilibria.
D) All of the above are possible.
E) There is not enough information to answer this question.

Question

Quizplus · Accepted Answer

The game has multiple Nash equilibria because any combination of bids that sum up to $500 or less can be an equilibrium, as neither player has an incentive to unilaterally change their bid if it means they get their bid amount without exceeding the total.

Two Individuals with Diverse Interests Are Bargaining Over the Distribution