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Economics Two baseball scouts are competing to sign the same player. The player is worth SlOOm if he is high quality, $50m if mediocre, and
Economics Two baseball scouts are competing to sign the same player. The player is worth SlOOm if he is high quality, $50m if mediocre, and nothing if low quality. The scouts do not know the player's quality with certainty, though it is common knowledge that Pr(v = 100) = Pr(v = O) = 1/4, while Pr(v = 50) = 1/2. The scouts must bid on the player in a twoplayer second price sealedbid auction. Before bidding on the player, Scout 1 and Scout 2 each carry out a report on the player to get a signal of his quality. Scout 1 gets signals 1, Scout 2 gets signals 2. va=100 then 51 =52 =H. If v=0 then 51 =52 =L. Instead, if v=50 then with probability 0.5 we have 51 = H, 52 = L and with probability 0.5 we have 51 = L, 52 = H. 1. Is it an equilibrium for each scout to bid their expected valuation? Why/why not?, show your workings 2. Is it an equilibrium for each scout to bid SO if their signal is L, but 5100 if their signal is H? (hint: is any deviation profitable?)
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