Answer to Question #63175 in Microeconomics for Abdu

Question

This question has two independent parts:
(a) Consider the following game. There are ten dollars to divide.
Two players are each required to simultaneously name an integer
between 0 and 10. The player who names the higher number gets
to keep the money. If they name the same number, each player
receives nothing, i.e., 0
i. Find the best response function for each player.
ii. Are there strategies that are strictly dominated? Demonstrate
your reasoning. What are the resulting strategies after iter-
ated elimination of strictly dominated strategies?

Answer 1

(a) Consider the following game. There are ten dollars to divide. Two players are each required to simultaneously name an integer between 0 and 10. The player who names the higher number gets to keep the money. If they name the same number, each player receives nothing, i.e., 0
i. The best response function for each player is to name 10 as the highest possible number in this game.
ii. The strategy to name 10 each time is strictly dominated for both players, but nobody will get the money.