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Problem 3. Cyberdefense. The Government selects its defensive strategy against potential cyber attacks. In doing so, the government may either be competent (c) or incompetent

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Problem 3. Cyberdefense. The Government selects its defensive strategy against potential cyber attacks. In doing so, the government may either be competent (c) or incompetent (1/). The government is aware of its type and selects whether to (Invest or (Njot invest into its cyberdefense. A group of Hackers observes the Government's decision to invest and decide whether to launch an (A)ttack or (Not. The Hackers do not know the Government's type, but only know that a fraction to of Governments are competent. The attack is successful either if the Government, is the incompetent type 9 or if it does not invest. Utilities are as follows: A N A N -1, -1 -1,0 -1, 2 -1,0 N -3.3 0,0 N -3,3 0,0 a. Simplify the problem by eliminating strictly dominated strategies. Hint: Start from the end of the game tree and work your way backwards through the tree. b. Find all perfect Bayesian equilibria of this game, given prior beliefs po. c. Explain the intuition behind the perfect Bayesian equilibria by distinguishing whether the Hackers starts with optimistic or pessimistic prior beliefs. d. Is this a signaling or a cheap-talk game? Explain

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