Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 3 (40 points) Two people are involved in a dispute. P2 (Column player) does not know whether P1 (row player) is strong (Type S)

image text in transcribed
image text in transcribed
Question 3 (40 points) Two people are involved in a dispute. P2 (Column player) does not know whether P1 (row player) is strong (Type S) or weak (Type W). P1 assigns a probability & to P2 being strong. P2 is fully informed about his own type. Each person can either Fight (F), Yield (Y) or Negotiate (N). The payoffs are de- scribed by the matrices below. P2 F YN FYN Type S F 3-1 3,0 2,1 Type W F 1,3 3,0 0,1 Y 0,3 0,0 0,1 Y 0,3 0,0 1,1 N1,3 1,0 2,1 N 1,3 1,0 1,1 P1 is Type S with prbx P1 is Type W with prb 1-a P2 a) (15 points) For what values of a, if any, is there a Pooling Bayesian Equilibrium in which Type W plays N and Type S both plays N (Negotiate)? If it exists, what does P2 do in this equilibrium? P2 F Y N FYN Type S F 3-1 3,0 2,1 Type W F 1,3 3,0 0,1 Y 0,3 0,0 0,1 Y 0,3 0,0 1,1 N 1,3 1,0 2,1 N 1,3 1,0 1,1 1 l Type S with prb Plis Type W with prb 1 P2 Question 3 (40 points) Two people are involved in a dispute. P2 (Column player) does not know whether P1 (row player) is strong (Type S) or weak (Type W). P1 assigns a probability & to P2 being strong. P2 is fully informed about his own type. Each person can either Fight (F), Yield (Y) or Negotiate (N). The payoffs are de- scribed by the matrices below. P2 F YN FYN Type S F 3-1 3,0 2,1 Type W F 1,3 3,0 0,1 Y 0,3 0,0 0,1 Y 0,3 0,0 1,1 N1,3 1,0 2,1 N 1,3 1,0 1,1 P1 is Type S with prbx P1 is Type W with prb 1-a P2 a) (15 points) For what values of a, if any, is there a Pooling Bayesian Equilibrium in which Type W plays N and Type S both plays N (Negotiate)? If it exists, what does P2 do in this equilibrium? P2 F Y N FYN Type S F 3-1 3,0 2,1 Type W F 1,3 3,0 0,1 Y 0,3 0,0 0,1 Y 0,3 0,0 1,1 N 1,3 1,0 2,1 N 1,3 1,0 1,1 1 l Type S with prb Plis Type W with prb 1 P2

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Cases An Active Learning Approach

Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt

2nd Edition

0130674842, 978-0130674845

Students also viewed these Accounting questions