3. Consider the following strategic situation concerning the owner of a firm (O), the manager of the firm (M), and a potential worker (W). The owner first decides whether to hire the worker, to refuse to hire the worker, or to let the manager make the decision. If the owner lets the manager make the decision, then the manager must choose between hiring the worker or not hiring the worker. If the worker is hired, then he chooses between working diligently or shirking. Assume that the hired worker does not know who hired him, when making a decision. If the worker is not hired, then all three players get a payoff of 0. If the worker is hired and shirks, then the owner and manager each get a payoff of -1, while the worker gets 2. If the worker works diligently, then he gets the payoff of 1, the person who hired him gets the payoff of 1, and the remaining player gets 0. (a) Represent this game in the extensive form. 1 (b) Write the normal form representation of this game (Hint: you will have to draw either 2 or 3 matrices)
3. Consider the following strategic situation concerning the owner of a firm (O), the manager of the firm (M), and a potential worker (W). The owner first decides whether to hire the worker, to refuse to hire the worker, or to let the manager make the decision. If the owner lets the manager make the decision, then the manager must choose between hiring the worker or not hiring the worker. If the worker is hired, then he chooses between working diligently or shirking. Assume that the hired worker does not know who hired him, when making a decision. If the worker is not hired, then all three players get a payoff of 0. If the worker is hired and shirks, then the owner and manager each get a payoff of -1, while the worker gets 2. If the worker works diligently, then he gets the payoff of 1, the person who hired him gets the payoff of 1, and the remaining player gets 0. (a) Represent this game in the extensive form. 1 (b) Write the normal form representation of this game (Hint: you will have to draw either 2 or 3 matrices)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter1: Introduction And Goals Of The Firm
Section: Chapter Questions
Problem 1.3CE
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Transcribed Image Text:3. Consider the following strategic situation concerning the owner of a firm (O), the manager of the firm
(M), and a potential worker (W). The owner first decides whether to hire the worker, to refuse to hire
the worker, or to let the manager make the decision. If the owner lets the manager make the decision,
then the manager must choose between hiring the worker or not hiring the worker. If the worker is
hired, then he chooses between working diligently or shirking. Assume that the hired worker does not
know who hired him, when making a decision. If the worker is not hired, then all three players get
a payoff of 0. If the worker is hired and shirks, then the owner and manager each get a payoff of -1,
while the worker gets 2. If the worker works diligently, then he gets the payoff of 1, the person who
hired him gets the payoff of 1, and the remaining player gets 0.
(a) Represent this game in the extensive form.
1
(b) Write the normal form representation of this game (Hint: you will have to draw either 2 or 3
matrices)
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