Midterm II Answer Key ECON 504 - Microeconomics II
نویسنده
چکیده
Solution The unique pure strategy subgame perfect equilibrium is (Rr, r). 2. (30pts.) An entrepreneur has a project that she presents to a capitalist. She has her own money that she could invest in the project and is looking for additional funding from the capitalist. The project is either good (denoted g) (with probability p) or it is bad (denoted b) (with probability 1− p) and only the entrepreneur knows the quality of the project. The entrepreneur (E) decides whether to invest her own money (I) or not (N), the capitalist (C) observes whether the entrepreneur has invested or not and then decides whether to invest his money (i) or not (n). Figure 1 represents the game and gives the payoffs, where the first number is the entrepreneur’s payoff and the second number is the capitalist’s. (a) (20pts.) Find the set of pure strategy perfect Bayesian equilibria of this game.
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Midterm Examination Solutions ECON 504 - Microeconomics II
Solution The following is a Nash equilibrium: Player 1 calls and the other players do not call. Player 1’s payoff in this action profile is equal to v− c, and is greater than 0, which is the payoff he would get if he deviated and did not call. All the other players get a payoff of v, which is greater than the payoff that they would get if they were to deviate and call: v − c. Therefore, no play...
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