A master student interested in pursuing a PhD is deciding between two courses: advancedgame theory x = A and introduction to game theory x = I. The student can be one oftwo types: 0= L or 0= H.The PhD admission officer can observe the courses chosen by the student x = {A, I} butnot the type of the student 0. Before observing the course chosen by the student, shebelieves both types are equally likely. She admits students only if she is sure that theyare type 0 = H (that is if she believes P(0 = H|x) = 1).The student gets 10 units of utility from being admitted to a PhD and 0 units if notadmitted, and pays costs c(0) if she chooses advanced game theory and costs 0 if shechooses introduction to game theory. We assume that c(H) = 0 < c(L) = 15.1) Is there a separating equilibrium in the game above? If so, what are the equilibriumstrategies of the candidate and the admission officer, and what are the beliefs of theadmission officer? What constraints need to be satisfied?

In game theory, rational decision-makers' strategic interactions are analyzed. It offers a framework…

1) Is there a separating equilibrium in the game above? If so, what are the equilibrium strategies of the candidate and the admission officer, and what are the beliefs of the admission officer? What constraints need to be satisfied?

1) Is there a separating equilibrium in the game above? If so, what are the equilibrium strategies of the candidate and the admission officer, and what are the beliefs of the admission officer? What constraints need to be satisfied?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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