Two telecom companies Fairtel and Gio are interested in procuring the last remaining license of a frequency band in 9G spectrum. Fairtel values the license at |100 crores and Gio values it at |200 crores. Each company’s valuation is known only to itself. The government asks each company to submit their ‘bid’ in a sealed envelope. The bids can be any number which is higher or lower or equal to their own valuations. They submit their bids independently and simultaneously without communicating with each other. The government then opens both the envelopes and allocates the license to the company that has the highest bid. The winning company is asked to pay a price equal to the bid
of the losing company. The losing company gets nothing and pays nothing. Both the companies know these rules. They submit bids strategically in order to win the license.

(a) Suppose Gio thinks that Fairtel is going to bid an amount |X crores which is less than |200 crores. What would Gio want to bid?
(b) Suppose Gio thinks that Fairtel is going to bid an amount |X crores which is higher than |200 crores. What would Gio want to bid?
(c) Guided by your answers to the previous two parts, explain whether it is a Nash equilibrium for each company to bid an amount equal to its valuation.