Consider the game depicted below. Player 1 decides between A and B in stage 1 of the game, and between G and H in stage 3 (if it is reached). Player 2 decides between C and D if Player 1 chose A, or between E and F if Player 1 chose B, in stage 2 of the game. 1 A B 2 с D (3,3) (0,5) G H (4,5) (5,-1) (a) List all the possible pure strategies for each player in this game and illustrate the payoffs from each pair of strategies in a matrix. [Note: each player's strategy should prescribe an action for each of his/her information node (set), regardless of whether that node will be reached in the outcome.] (b) Identify the Nash Equilibria strategies and payoffs. (c) Which of the Nash Equilibria is/ are also subgame perfect equilibrium / equilibria? Explain. E (-1,0) 2 F

Consider the game depicted below. Player 1 decides between A and B in stage 1 of the game, and between G and H in stage 3 (if it is reached). Player 2 decides between C and D if Player 1 chose A, or between E and F if Player 1 chose B, in stage 2 of the game. 1 A B 2 с D (3,3) (0,5) G H (4,5) (5,-1) (a) List all the possible pure strategies for each player in this game and illustrate the payoffs from each pair of strategies in a matrix. [Note: each player's strategy should prescribe an action for each of his/her information node (set), regardless of whether that node will be reached in the outcome.] (b) Identify the Nash Equilibria strategies and payoffs. (c) Which of the Nash Equilibria is/ are also subgame perfect equilibrium / equilibria? Explain. E (-1,0) 2 F

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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