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I can get one perfect Bayesian equilibrium -- Bank: (Priv. Priv.); Regulator: (Reg, No, No) But I cannot figure out another one. 5. An investment

I can get one perfect Bayesian equilibrium -- Bank: (Priv. Priv.); Regulator: (Reg, No, No)

But I cannot figure out another one.

image text in transcribedimage text in transcribed
5. An investment bank has made some investments. The investments are either \"good\" with probability 2/3 or \"bad\" probability 1/3. Knowing the value of the investments, the investment bank can either make its books public or private. A regulatory agency then decides whether to regulate the bank. The regulator prefers to impose regulations on an investment bank with \"bad\" investments but not with \"good\" investments. The bank would rather not be regulated in either case, but the payoffs differ depending on whether it is good or bad. If it has \"bad\" investments, then the regulations include a ne in the case that it kept its books private. The payoffs to the bank and the regulator are pictured in Figure 2 (the bank's is the first payoff and the regulator's is the second). Identify two different pure strategy perfect Bayesian equilibria of the game. In each case, specify the regulator's belief at the information set following a \"priv\" action by the bank. N Bad 1/3 Good 2/3 B B Pub Priv. Priv Pub R R R No Reg No Reg No Reg No Reg 0 -1 1 -2 3 1 2 1 -1 1 -1 1 1 -1 1 -1

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