Two players: The employee (Linda) and the employer (Vera). Linda has to choose whether to pursue training that costs K1, 000 to herself or not. Vera has to decide whether to pay a fixed wage of K10, 000 to Linda or share the revenues of the enterprise 50:50 with Linda. The output is positively affected by both training and revenue sharing. Indeed, with no training and a fixed wage total output is K20, 000, while if either training or profit sharing is implemented the output rises to K22, 000. If both training and revenue sharing are implemented the output is K25,000. a. Construct the pay-off matrix b. Is there any equilibrium in dominant strategies? c. Can you find the solution of the game with Iterated Elimination of Dominated Strategies? d. Is there any Nash equilibrium?

Two players: The employee (Linda) and the employer (Vera). Linda has to choose whether to pursue training that costs K1, 000 to herself or not. Vera has to decide whether to pay a fixed wage of K10, 000 to Linda or share the revenues of the enterprise 50:50 with Linda. The output is positively affected by both training and revenue sharing. Indeed, with no training and a fixed wage total output is K20, 000, while if either training or profit sharing is implemented the output rises to K22, 000. If both training and revenue sharing are implemented the output is K25,000. a. Construct the pay-off matrix b. Is there any equilibrium in dominant strategies? c. Can you find the solution of the game with Iterated Elimination of Dominated Strategies? d. Is there any Nash equilibrium?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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