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. Two friends are playing a matching card game where friend 1, Max, chooses an Ace,...

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Economics

. Two friends are playing a matching card game where friend 1,Max, chooses an Ace, Two, or Three and friend 2, Lucy, plays King,Queen, or Jack. They both put $ 5 each into the pot. Depending onwhat cards they play, they split the pot differently. The payoffsare summarized in the following table:

   Lucy

King Queen Jack

Max Ace (1,3)   (3,5) (2,4)

Two (6,5)   (3,3) (3,2)

Three (4,2) (5,4) (3,1)

(a) Use iterated elimination of strictly dominated actions(IESDA) to eliminate actions for Max and Lucy. Write out whichaction is dominated and HOW it is dominated (if you use a mixedstrategy to eliminate another action, you need to specify the setof possible mixes or a particular mix).(4 points)

(b) Solve for all Nash Equilibrium/Equilibria of the game.Circle your answer. Explain why the set of actions you identify isa Nash Equilibrium. Write out the definition of Nash Equilibrium aspart of your explanation. (8 points)

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