1 4. Consider the following strategic environment involving a firm manager (Manager) and twoworkers (Worker 1 and Worker 2).The sequence of moves is as follows.In Stage 1, the Manager decides the shares of the total revenues allocated to Worker 1 andWorker 2 (each worker receives the same share of revenues). Two possible sharing rulescan be chosen by the Manager: Low Sharing Rule (L, a low percentage of revenues sharedwith each worker) and High Sharing Rule (H, a high percentage of the revenues share witheach worker).In Stage 2 (the Effort Stage), after observing the sharing rule chosen by the Manager,Worker 1 and Worker 2 simultaneously decide whether to "Work Hard" or to "Shirk."The following two matrices represent the Effort Stage when the Low Sharing Rule (L) ischosen by the Manager and when the High Sharing Rule (H) is chosen by the Manager. Thepayoffs in brackets correspond to the Manager.Low Sharing Rule (L)High Sharing Rule (H)Work HardShirkWork HardShirkWork31, 312, 40Work82, 8232, 70Hard[206][120]Hard[104][60]Shirk40, 220, 20Shirk70, 3235, 35(120](60][60](30]Represent this strategic envitonment in an extensive form.a.b.Characterize the S.P.N.E. of the game using the Generalized Backward Inductionprocedure. Make any necessary assumptions to achieve a unique S.P.N.E Explain yourresults.

Given, One ManagerTwo Players : Worker 1 and Worker 2Both Workers have the same strategies : Work…

4. Consider the following strategic environment involving a firm manager (Manager) and two workers (Worker 1 and Worker 2). The sequence of moves is as follows. In Stage 1, the Manager decides the shares of the total revenues allocated to Worker 1 and Worker 2 (each worker receives the same share of revenues). Two possible sharing rules can be chosen by the Manager: Low Sharing Rule (L, a low percentage of revenues shared with each worker) and High Sharing Rule (H, a high percentage of the revenues share with each worker).

4. Consider the following strategic environment involving a firm manager (Manager) and two workers (Worker 1 and Worker 2). The sequence of moves is as follows. In Stage 1, the Manager decides the shares of the total revenues allocated to Worker 1 and Worker 2 (each worker receives the same share of revenues). Two possible sharing rules can be chosen by the Manager: Low Sharing Rule (L, a low percentage of revenues shared with each worker) and High Sharing Rule (H, a high percentage of the revenues share with each worker).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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