See below.
Problem 2: Wage Bargaining and Skill Development There are three consulting firms hiring next year: Strategy&Company, Audit- Coopers, and Tech-Centure. Chris is finishing his first year of MBA at CBS and would like to find a job in consulting. This summer Chris will work as an intern at Strategy. At the end of the summer internship, Strategy will offer Chris a permanent position at the firm. If Chris rejects the offer, he can then go to the job market, where Audit and Tech can simultaneously make offers to Chris. So the game is as follows. First, Strategy offers a wage ws to Chris. Chris can either accept or reject the offer. If Chris accepts, the game is over. If Chris rejects, then Audit and Tech secretly and simultaneously offer wages wA and WT to Chris. Chris can then accept Audit's offer, or accept Tech's offer, or reject both offers. Chris can generate a revenue of 100 for Strategy but only of 50 for Audit or Tech. Wages can be any number greater than or equal to zero. The payoff to a firm is the revenue generated by Chris minus his wage if Chris accepts its offer, and zero if Chris rejects. The payoff to Chris is the wage offered by the firm where he accepts the offer, if he accepts an offer, and zero if he rejects all offers. Assume that if Chris is indifferent between accepting and rejecting an offer at a given decision node, then he accepts. Also, assume that if Chris is indifferent between accepting Audit's offer and accepting Tech's offer, then he accepts Audit's offer with 0.5 probability and Tech's offer with 0.5 probability. [Note: This assumption has no effects on the results.]a) Suppose that Chris rejects Strategy's offer and goes to the job market, where Audit and Tech make offers simultaneously. What offers will Audit and Tech make? b) Consider now the whole game. What is the credible Nash equilibrium? Describe the players' strategies. What is the outcome of the game? [Note: You may draw the game tree, but you are not required to.] c) Now suppose that before Chris starts his summer internship, he can take a course on consulting at CBS. There are two consulting courses: corporate strategy and general consulting. If Chris takes the corporate strategy course, he can generate an extra revenue of 50 if he works for Strategy. (That is, he can generate revenues of 150 for Strategy, and of 50 for Audit or Tech.) If Chris takes the general consulting course, he can generate an extra revenue of 25 for Audit and Tech. (That is, he can generate revenues of 100 for Strategy, and of 75 for Audit or Tech.) The rms can observe what course Chris decides to take. Taking a consulting course costs 10 to Chris (regardless of which course he chooses). Find the credible Nash equilibrium. Will Chris take a consulting course? Which one? (1) Consider the same setting as in part c), but now suppose that after the summer internship, it is Chris who makes an offer to Strategy about his wage 1113. Strategy can either accept or reject the offer. (Assume that if Strategy is indi'erent between accepting and rejecting an oer, then it accepts.) If Strategy accepts, the game is over. If Strategy rejects, then Chris goes to the job market where, as above, Audit and Tech secretly and simultaneously oer wages um and "(HT to Chris. Everything else is the same as above. Will your answer to part c) change? Explain
