Y5

 

In the following dynamic game, a boss first decides whether to take a business trip (travel) or stay at the company headquarters (stay). After this, the workers decides whether to work hard (work) or slack off (slack). If the boss has chosen to stay in the last period, she can observe whether the Worker is slacking off or working hard. However, if the boss has chosen to travel, she is unable to observe the worker's choice. After the worker moves, the boss decides whether to give a bonus or not give a bonus (n.b.) to the worker. The game tree with the associated payoffs is shown below. The payoffs are ordered (Boss, Worker). Find all Pure-Strategy Subgame Perfect Nash Equilibria in the game (don't worry about mixed strategies). Boss stay travel Worker Worker slack work slack work Boss Boss Boss bonus n.b. bonus n.b. bonus n.b. bonus n.b. (-15,5) (-5,0) (0,5) (-10,-10) (-10,5) (0,0) (5,5) (5,-10)