There are three consulting firms hiring this year: Nous Group, BCG, and McKinsey. Chlo will graduate from the MBA program at MBS and would like to find a job in consulting. Chlo currently works as an intern at Nous. At the end of the internship, Nous will offer Chlo a permanent position at the firm. If Chlo rejects the offer, she can then go to the job market, where BCG and McKinsey can simultaneously make offers to Chlo. The game is as follows. First, Nous offers a wage wn to Chlo. Chlo can either accept or reject the offer. If Chlo accepts Nous's offer, the game is over. If she rejects it, then BCG and McKinsey secretly and simultaneously offer wages wb and wm. Chlo can then accept BCG's offer (wb), or accept McKinsey's offer (wm), or reject both offers. Chlo can generate a revenue of 100 for Nous but only of 50 for BCG or McKinsey. The payoff to a firm is the revenue generated by Chlo, minus her wage if Chlo accepts its offer, and zero if Chlo rejects it. The payoff to Chlo is the wage offered by the firm whose offer she accepts, and zero if she rejects all offers. As a tie-breaking rule assume that if Chlo is indifferent between accepting and rejecting an offer at a given decision node, then she accepts it. Also, assume that if Chlo is indifferent between accepting BCG's offer and McKinsey's offer, then she flips a coin to decide. Question 1. Suppose that Chlo rejects Nous's offer and goes to the job market, where BCG and McKinsey make offers simultaneously. What offers will BCG and McK- insey make? Question 2. Consider now the entire game. What is the credible Nash equilibrium? Describe the players' strategies. What is the outcome of the game? 1

Now suppose that Chlo can take a course on consulting at MBS. There are two courses: corporate strategy and game theory. If Chlo takes the corporate strategy course, she can generate an extra revenue of 50 if she works for Nous. (That is, she can generate revenues of 150 for Nous, and of 50 for BCG or McKinsey.) If Chlo takes the game theory course, she can generate an extra revenue of 25 for any of the consult- ing firms. (That is, she can generate revenues of 125 for Nous, and of 75 for BCG or McKinsey.) The firms can observe what course Chlo decides to take. Taking a course costs 10 to Chlo (regardless of which course she chooses). Question 3. Find the credible Nash equilibrium. Will Chlo take a consulting course? Which one? Consider the same setting as in Question 3, but now suppose that after the internship, it is Chlo who makes an offer to Nous about her wage wn. Nous can either accept or reject the offer. (Assume that if Nous is indifferent between accepting and rejecting an offer, then it accepts it.) If Nous accepts, the game is over. If Nous rejects, then Chlo goes to the job market where, as above, BCG and McKinsey secretly and simultaneously offer wages wb and wm to Chlo. Everything else is the same as above. Question 4. Does your answer to Question 3 change? Explain.