Consider the following 3-card poker game between two players. There are 3 cards in the deck: High (H), Low (L) and Middle (M). (with the ranking L < M < H) Each player pays an ante of 1. The deck is shuffled and each player is dealt a card. The players each observe their own card. Player 1 chooses to Fold or to Bid. If folding, the payoffs are (-1,1). If Player 1 bids, then player 2 may respond by folding or bidding. If Player 2 folds, the payoffs are (1,-1). If Player 2 bids, the players show their cards. The payoff to the player with the highest card is 2, the other player's payoff is -2. Assume that if player 2 has the chance to bid, she will always bid when she has H, and always fold when she has L, and that player 1 knows this (because these choices are best responses for player 2) Suppose that Player 1 is dealt M. Given the above information about player 2, determine player 1's expected payoffs from bidding and folding. a) E(bid) = 0, E(fold) = 0
b) E(bid) = -1, E(fold) = 0
c) E(bid) = 0.5, E(fold) = -0.5
d) E(bid) = -0.5, E(fold) = -1
e) E(bid) = 0, E(fold) = -