Question 2 Consider the sequential game in which the principal P first makes her choice between choosing either no incentives (NI) or incentives (I). If P opts for NI the game ends and the payoffs are 7 to the P and 8 to A. If, instead, the P opts for I the A can choose to either work hard (H) or put in low effort (L). If P choose I and A opts for H the payoffs are 8 to the P and 6 to the A. If P opts for I and A for L, the payoffs are 6 to the principal and 5 for the agent. Which statements are true? O A Nash equilibrium of the game is (NI, L). O There is no pure strategy of the game O A subgame perfect equilibrium of the game is (NI, L). O A subgame perfect equilibrium of the game is (I, H) O A Nash equilibrium of the game is (I, H) O The Nash equilibrium is (I, L) O A Nash equilibrium of the game is (NI, H)

Question 2 Consider the sequential game in which the principal P first makes her choice between choosing either no incentives (NI) or incentives (I). If P opts for NI the game ends and the payoffs are 7 to the P and 8 to A. If, instead, the P opts for I the A can choose to either work hard (H) or put in low effort (L). If P choose I and A opts for H the payoffs are 8 to the P and 6 to the A. If P opts for I and A for L, the payoffs are 6 to the principal and 5 for the agent. Which statements are true? O A Nash equilibrium of the game is (NI, L). O There is no pure strategy of the game O A subgame perfect equilibrium of the game is (NI, L). O A subgame perfect equilibrium of the game is (I, H) O A Nash equilibrium of the game is (I, H) O The Nash equilibrium is (I, L) O A Nash equilibrium of the game is (NI, H)

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

Chapter18: Auctions

Section: Chapter Questions

Problem 18.1IP

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