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alternative way to interpret mixed strategies is to assume that there are many identical players, each playing a pure strategy. Under this interpretation, one can
alternative way to interpret mixed strategies is to assume that there are many identical players, each playing a pure strategy. Under this interpretation, one can compute the share (i.e., a number between ( and 1) of players that play a given pure strategy and interpret that share as the frequency by which (or the probability that) that pure strategy is played. This is just a matter of interpretation, so that this problem will be framed using both interpretations. Assume that a worker's performance is decreased by the use of social media in the workplace and that this has a negative impact on the employer's profits. A worker who does not use social media (NS) while working produces output of value 7 > 0 for the employer. The value generated by a worker who uses social media (S) is 0. A worker is paid w > 0 if he is not discovered using social media, but otherwise is paid 0. The use of social media gives a utility of s > 0. The employer can decide to monitor (M) the workers but this is costly. Monitoring a worker costs c > 0. Let o e [0, 1] be the share of employees who use social media and let BE [0, 1] be the probability that a worker is monitored. a. Write down the matrix corresponding to the normal-form of this game. b. Assume that w > c and w > s. How large should the share of workers who use social media in the work force be for random monitoring to be optimal? c. With what probability should a worker be monitored to be indifferent between using social media or not? Find the Nash equilibrium in mixed strategies. Imagine now that the Nash equilibrium in mixed strategies you just found is at play but that the government is concerned about the low productivity of the work force. In particular, the government wants to reduce the use of social media on the job and is choosing between relaxing the privacy laws so that monitoring is made easier (i.e., reduce c), or forcing the social
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