Alex and Bob are co-workers, and they must complete a project together. Each of them independently and simultaneously must decide whether to make a low effort (L), medium effort (M), or high effort (H) to complete this project. The normal form representation of the game via a payoff matrix is given below. Alex L M H L 1,2 3,1 6,3 Bob M 2,3 5,3 4,2 H 4,4 3,2 3,1
Alex and Bob are co-workers, and they must complete a project together. Each of them independently and simultaneously must decide whether to make a low effort (L), medium effort (M), or high effort (H) to complete this project. The normal form representation of the game via a payoff matrix is given below. Alex L M H L 1,2 3,1 6,3 Bob M 2,3 5,3 4,2 H 4,4 3,2 3,1
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose that Alex and Bob complete the project sequentially. Assume that Alex decides his effort level and starts the project first, and then Bob decides his effort level and finishes the project.
Present the extensive-form representation of the game (i.e., draw a decision tree which is also referred as the game tree). What is your prediction regarding the outcome of the game? Explain your prediction.
Transcribed Image Text:Alex and Bob are co-workers, and they must complete a project together. Each of
them independently and simultaneously must decide whether to make a low effort
(L), medium effort (M), or high effort (H) to complete this project. The normal form
representation of the game via a payoff matrix is given below.
Alex
L
M
H
L
1,2
3,1
6,3
Bob
M
2,3
5,3
4,2
H
4,4
3,2
3,1
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