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Think of the Golden Ball game. Now player 1 is money-minded and jealous, and player 2 is very good-hearted, so the payoff matrix is follows:
Player 2
SP ST
Player 1 SP 5, 5 -2, -1
ST 10, -1 0, -1
a. Solve for all the mixed Nash equilibrium if any.
b. Among the four outcomes here, which outcome(s) are Pareto optimal (in the sense that you cannot find another outcome that makes no player worse off but some player better-off)?
In equilibrium, what are the letters and the total dollar amounts that correspond to the area for the... i. Original Consumer Surplus? ii. Original Producer Surplus? iii.
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Find the best response functions and the mixed strategies Nash Equilibrium if each player randomizes over his actions.
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