I want S5 to be answered. I placed S3 next to it as S5 references it.

53. A rm has two divisions, each of which has its own manager. Managers of these divisions are paid according to their effort in promoting produc- tivity in their divisions. The payment scheme is based on a comparison of the two outcomes. Ifhoth managers have expended "high effort," each earns $150,000 a year. If both have expended \"low effort," each earns \"only" $100,000 a year. But if one of the two managers shows \"high effort" whereas the other shows \"low effort," the \"high effort\" manager is paid $150,000 plus a $50,000 bonus, but the second (\"low effort\") manager gets a reduced salary {for subpar performance in comparison with her competition) of $80,000. Managers make their effort decisions indepen- dently and without knowledge of the other manager's choice. (a) Assume that expending effort is costless to the managers and draw the payoff table for this game. Find the Nash equilibrium of the game and explain whether the game is a prisoners' dilemma. (13) Now suppose that expending high effort is costly to the manag- ers [such as a costly signal of quality). In particular, suppose that \"high effort\" costs an equivalent of $60,000 a year to a managerwho chooses this effort level. Draw the game table for this new version of the game and nd the Nash equilibrium. Explain whether the game is a prisoners' dilemma and how it has changed from the game in part (a). (c) If the cost of high effort is equivalent to $80,0001year, how does the game change from that described in part (h)?what is the new equi- librium? Explain whether the game is a prisoners' dilemma and how it has changed from the games in parts [a] and (b). 55. lwould like this to he answered. Recall the example from Exercise 33 in which two division managers' choices of High or Low effort levels determine their salary payments In part (b) of that exercise, the cost of exerting High effort is assumed to be $60,000 a year. Suppose now that the two managers play the game in part (b) of Exercise S3 repeatedly for many years. Such repetition allows scope for an unusual type of cooperation in which one is designated to choose High effort while the other chooses Low. This cooperative agree- ment requires that the High-effort manager make a side payment to the Low-effort manager so that their payoffs are identical. [3) What size of side payment guarantees that the nal payoffs of the two managers are identical? How much does each manager earn in a year in which the cooperative agreement is in place? (1)) Cooperation in this repeated game entails each manager's choosing her assigned effort level and the High-effort manager making the designated side payment. Defectjon entails refusing to malre the side payment. Under what values of the rate of return can this agree ment sustain cooperation in the managers' repeated game