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The situation is the case of 'Partially Aligned Interests: Financial Adviser and Investor' in Chapter 9. You will complete a similar analysis for the case
The situation is the case of 'Partially Aligned Interests: Financial Adviser and Investor' in Chapter 9. You will complete a similar analysis for the case where the adviser's report has to be the coarser choice between B or "not B." In this case, the game is represented as the following tree: Invest 2, -52 You Bad Not 0, 0 Adviser Invest 2-L, -52 Not Bad You B (1/3) *Not 0. 0 Nature Invest 2.2, -1.2 Adviser M (1/3) You Not Bad Not 0, 0 G (1/3) Adviser Invest 13, 42 You Not Bad Not 0, 0 where L is the cost of lost reputation from exaggeration. The babbling Nash Equilibrium of this game is (Always NB, Invest if NB) O (NB only if M or G, Invest if NB) O (Always NB, Not if NB) O (NB only if M or G, Not if NB)
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