5. What is player 3's knowledge of player 1's choice: 1 A 113 1 L 1 3 RL 000 R 113 3 L RL R 2 1 1 2 1 1 30 3 1 1 1 1 a) Player 3 knows nothing. b) Player 3 knows only player 2's choice, but not player 1's choice. Oc) Player 3 knows whether it is A or not. 200 R 2 000 L B 221 R 2

Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter20: The Problem Of Adverse Selection Moral Hazard
Section: Chapter Questions
Problem 3MC
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5. What is player 3's knowledge of player 1's choice:
1
A
L
R
2
R
L
000
22
B
3
3
RL
RL
R
1
0 1
1
1
1
0
1
1
2
1
3
0
3 0
1 1 1 1
a) Player 3 knows nothing.
b) Player 3 knows only player 2's choice, but not player 1's choice.
c) Player 3 knows whether it is A or not.
R
221
Transcribed Image Text:5. What is player 3's knowledge of player 1's choice: 1 A L R 2 R L 000 22 B 3 3 RL RL R 1 0 1 1 1 1 0 1 1 2 1 3 0 3 0 1 1 1 1 a) Player 3 knows nothing. b) Player 3 knows only player 2's choice, but not player 1's choice. c) Player 3 knows whether it is A or not. R 221
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