Suppose you are interested in applying equilibrium theory to the following game, where 0₁ = {E, F}. Show that there is Bayesian Nash equilibrium in which player 2 plays a sub-optimal action. Nature Player 1 P 1-p NF NE GF Player 2 0,0 GE 0,0 A R A R 1,1 -1,0 1,0 -1,-1

Suppose you are interested in applying equilibrium theory to the following game, where 0₁ = {E, F}. Show that there is Bayesian Nash equilibrium in which player 2 plays a sub-optimal action. Nature Player 1 P 1-p NF NE GF Player 2 0,0 GE 0,0 A R A R 1,1 -1,0 1,0 -1,-1

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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Question

Suppose you are interested in applying equilibrium theory to the following game, where 61 = {E,F}. Show that there is Bayesian
Nash equilibrium in which player 2 plays a sub-optimal action.
Player 2
1,1
GF
Player 1
R
-1,0
NF
0,0
Nature
A
1,0
GE
1- p
R
-1, –1
NE
0,0

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