1. Two people have $10 to divide between themselves. Each person names a number (nonnegative integer) no more than 10. If the sum of the two numbers is at most 10, each person gets the named amount of dollars, and the rest of the money is destroyed. If the sum exceeds 10, and the numbers are different, the person who has named the smaller number, receives the corresponding number of dollars, and the second person receives the rest. If the sum exceeds 10, and the numbers are equal, each person receives $5. Determine the be

Step-by-step explanation:

Determine the best response of each player to each of the other player’s actions; plot them in a diagram and thus find the Nash equilibria of the game.

The best response for player 2 can be stated as:

(where X1 equals the dollar that a person names and Y2(X1) being the amount the person receives)

X1Y2(X1)

010

19,10

28,9,10

37,8,9,10

46,7,8,9,10

55,6,7,8,9,10

65,6

76

87

98

109

Th best responses for player 1 would be the same.

Nash equilibria is the set of strategies that every person forms given no person has any incentive to change. Hence, we can say that there are 4 Nash equilibria: (5,5) , (5,6) , (6,5) , (6,6)