Marble box game with payoffs that shrink
Question
Players and each own marbles. Simultaneously and secretly, each chooses how many of their own marbles to put into a shared box, anywhere from to ; say contributes and contributes .
Marbles are then drawn from the box twice, with the drawn marble returned before the second draw. Every time a marble belonging to is drawn, an outside party pays the amount ; every time one of 's marbles is drawn, is paid .
If both players act optimally, what is 's expected total payout over the two draws?
Short answer
. Per draw earns ; the best response is , whose symmetric fixed point is . Among integers, is the best response to , so both put in marbles, and earns per draw, i.e. over two draws.
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