Reference no: EM132786611
Question:
Comments : Two mining companies, Fox and Trot, bid for the right to drill a eld. The possible bids are $ 15 Million, $ 25 Million, $ 35 Million, $ 45 Million and $ 50 Million. The winner is the company with the higher bid.
The two companies decide that in the case of a tie (equal bids), Fox is the winner and will get the eld.
Fox has ordered a geological survey and, based on the report from the survey, concludes that getting the eld for more than $ 45 Million is as bad as not getting it (assume loss), except in case of a tie (assume win).
(a) State reasons why/how this game can be described as a two-players-zero-sum game
(b) Considering all possible combinations of bids, formulate the payo matrix for the game.
(c) Explain what is a saddle point. Verify: does the game have a saddle point?