-Consider the one-time Nash bargaining game depicted in Figure 12.1 in which A and B individuals are bargaining over the distribution of $40. Bids must be in increments of $10. In this game, the sum of the players' bids cannot exceed $40. If the sum of the bids are less than $40, each bidder receives his or her bid, and the rest goes to charity. If the sum of the bids exceeds $40, the bidders receive nothing, and $40 is given to charity. The most likely Nash equilibrium strategy profile for this game is:
A) {$0, $0}.
B) {$10, $10}.
C) {$20, $20}.
D) {$40, $0}.
E) {$0, $40}.

Question

-Consider the one-time Nash bargaining game depicted in Figure 12.1 in which A and B individuals are bargaining over the distribution of $40. Bids must be in increments of $10. In this game, the sum of the players' bids cannot exceed $40. If the sum of the bids are less than $40, each bidder receives his or her bid, and the rest goes to charity. If the sum of the bids exceeds $40, the bidders receive nothing, and $40 is given to charity. The most likely Nash equilibrium strategy profile for this game is:
A) {$0, $0}. 
B) {$10, $10}. 
C) {$20, $20}. 
D) {$40, $0}. 
E) {$0, $40}.

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is the best response to the other player's strategy. In this game, bidding $20 each maximizes the players' individual payoffs without exceeding the total amount of $40, ensuring both players receive their bids without forfeiting the amount to charity. This outcome is stable because neither player has an incentive to unilaterally change their bid, as doing so would either reduce their own payoff or risk exceeding the $40 limit, resulting in a loss of the entire amount to charity.

-Consider the One-Time Nash Bargaining Game Depicted in Figure 12