Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2. Consider a gunfight between Bat Masterson and William Curly Bill Brocius. Both of the men have private information regarding their skill with a six-shooter.

image text in transcribed

2. Consider a gunfight between Bat Masterson and William "Curly Bill" Brocius. Both of the men have private information regarding their skill with a six-shooter. Nature moves first by determining each gunfighter's skill. He can have either a fast draw or a slow draw. There is a 65% chance that Bat is fast and a 60% chance that Curly ill is fast. After each gunfighter learns his type-though remaining uncertain about the other gunfighter's type - he chooses between draw and wait. If both wait, then the payoff is 50 . If both draw and (1) they are of the same type (either both fast or both slow), then each has a payoff of 20 ; and (2) they are of different types, then the fast gunfighter has a payoff of 30 and the slow one of 40. If one draws and the other waits and (1) they are of the same type, then the one who drew has a payoff of 30 and the other a payoff of 40; (2) the one who draws is fast and the other is slow, then the one who drew has a payoff of 30 and the other a payoff of 40; and (3) the one who draws is slow and the other is fast, then each has a payoff of 20 . If at least one chooses draw, then there is a gunfight. a. Is it consistent with BNE for there to be a gunfight for sure? (That is, both gunfighters draw, regardless of their type.) b. Is it consistent with BNE for there to be no gunfight for sure? (That is, both gunfighters wait, regardless of their type.) c. Is it consistent with BNE for a gunfighter to draw only if he is slow? 2. Consider a gunfight between Bat Masterson and William "Curly Bill" Brocius. Both of the men have private information regarding their skill with a six-shooter. Nature moves first by determining each gunfighter's skill. He can have either a fast draw or a slow draw. There is a 65% chance that Bat is fast and a 60% chance that Curly ill is fast. After each gunfighter learns his type-though remaining uncertain about the other gunfighter's type - he chooses between draw and wait. If both wait, then the payoff is 50 . If both draw and (1) they are of the same type (either both fast or both slow), then each has a payoff of 20 ; and (2) they are of different types, then the fast gunfighter has a payoff of 30 and the slow one of 40. If one draws and the other waits and (1) they are of the same type, then the one who drew has a payoff of 30 and the other a payoff of 40; (2) the one who draws is fast and the other is slow, then the one who drew has a payoff of 30 and the other a payoff of 40; and (3) the one who draws is slow and the other is fast, then each has a payoff of 20 . If at least one chooses draw, then there is a gunfight. a. Is it consistent with BNE for there to be a gunfight for sure? (That is, both gunfighters draw, regardless of their type.) b. Is it consistent with BNE for there to be no gunfight for sure? (That is, both gunfighters wait, regardless of their type.) c. Is it consistent with BNE for a gunfighter to draw only if he is slow

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Libby, Short

6th Edition

978-0071284714, 9780077300333, 71284710, 77300335, 978-0073526881

More Books

Students also viewed these Accounting questions

Question

Show that standard Brownian motion is a Martingale.

Answered: 1 week ago

Question

4. Are there any disadvantages?

Answered: 1 week ago

Question

3. What are the main benefits of using more information technology?

Answered: 1 week ago

Question

start to review and develop your employability skills

Answered: 1 week ago