A uniоn аnd а firm аre negоtiating a new labоr contract. The union’s value of winning the dispute is , while the firm’s value is . These valuesare independently drawn from a uniform distribution on . Each side incurs a cost of $1 per unit of time during a strike. Each privately choosesa maximum holdout time . The side willing to wait longer wins, and the strike endswhen the weaker side concedes. Your grade will depend primarily on the quality of your economic reasoning rather thanreaching any particular conclusion.(a) (5 points) Explain why this war of attrition can be interpreted as an auction. Treat each player’s holdout time as a bid. What does each side ”pay” in equilibrium? (b) (5 points) Which auction format discussed in class is this most similar to? In what important ways does the war of attrition differ from that auction? (c) (3 points) Suppose instead the union and firm hire professional chess players to play a best-of-seven match to determine the outcome. What are the ”revenues” generated by this mechanism? (d) (4 points) Would the revenues generated by these two mechanisms be similar? Explain. (e) (3 points) Would the two mechanisms be equally socially efficient? Explain.