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Please help with questions, especially with the form game in C Consider an investor who is able to choose between investing 8 million $ or

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Please help with questions, especially with the form game in C

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Consider an investor who is able to choose between investing 8 million $ or not to invest at all, in a project that is carried out by an entrepreneur. The entrepreneur can then either cooperate, resulting in a net profit of 4 million $ for each party, or appropriate the investment in which case the investor looses all the money to the entrepreneur. When the investor does not invest the profit is zero for both agents. The game looks as follows: Agent cooperate appropriate Invest 4.4 -8 , 8 Principal Don't invest 0,0 0,0 a) Assume that the principal has the oppurtunity to choose if to invest or not before the agent chooses his performance. Draw the extensive form game and find the subgame perfect equilibrium. Will the equilibrium be Pareto efficient? Will the outcome of the game be cooperative? b) Suppose that an enforceable contract gives the investor compensation from the agent amounting to the investment plus the expected profit foregone in case of breach/appropriation. (Perfect expectation damages in C&U) Write down this new extensive form game and find the subgame perfect equilibrium. Will the outcome of the game be Pareto efficient? c) Suppose that there is uncertainty regarding the cost of carrying out the contract at the time of signing it. The entrepreneur can incur a cost of either zero or 10. Will perfect expectation damages lead to an efficient incentive for breach in this case? Draw the extensive form game and analyze the result

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