In the sequential production game shown below, the actions of four players arerequired in order for a company's project to be successful (for example, each playercould be a different division or department with the company).Player 1Player 2Player 3Player 4ActActActAct101010QuitQuitQuitQuit10-X-X-X-X-X-XSuppose x = 5,000 (payoffs are -5,000). Suppose player 1 believes that Player 4 willquit with probability p. How does this change the game?%3DO a) If 0 < p < 1, Player 1 will actO b) If p > 0.002, Player 1 will quit.O c) If p > 0, Player 1 will quitd) The value of p is irrelevant to Player 1O o o o

In the above sequential game let us use backward induction method to get some idea about the game…

required in order for a company's project to be successful (for example, each player could be a different division or department with the company). Player 1 Player 2 Player 3 Player 4 Act Act Act Act 10 10 10 Quit Quit Quit Quit 10 -X- -X -X

required in order for a company's project to be successful (for example, each player could be a different division or department with the company). Player 1 Player 2 Player 3 Player 4 Act Act Act Act 10 10 10 Quit Quit Quit Quit 10 -X- -X -X

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.7P

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Question

In the sequential production game shown below, the actions of four players are
required in order for a company's project to be successful (for example, each player
could be a different division or department with the company).
Player 1
Player 2
Player 3
Player 4
Act
Act
Act
Act
10
10
10
Quit
Quit
Quit
Quit
10
-X
-X
-X
-X
-X
-X
Suppose x = 5,000 (payoffs are -5,000). Suppose player 1 believes that Player 4 will
quit with probability p. How does this change the game?
%3D
O a) If 0 < p < 1, Player 1 will act
O b) If p > 0.002, Player 1 will quit.
O c) If p > 0, Player 1 will quit
d) The value of p is irrelevant to Player 1
O o o o

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