A master student interested in pursuing a PhD is deciding between two courses: advanced game theory x = A and introduction to game theory x = I. The student can be one of two types: 0= L or 0= H. The PhD admission officer can observe the courses chosen by the student x = {A, I} but not the type of the student 0. Before observing the course chosen by the student, she believes both types are equally likely. She admits students only if she is sure that they are type 0 = H (that is if she believes P(0 = H|x) = 1). The student gets 10 units of utility from being admitted to a PhD and 0 units if not admitted, and pays costs c(0) if she chooses advanced game theory and costs 0 if she chooses introduction to game theory. We assume that c(H) = 0 < c(L) = 15. 1) How do we call a situation of asymmetric information in which the informed player moves first? What if the uninformed player moves first?

A master student interested in pursuing a PhD is deciding between two courses: advanced game theory x = A and introduction to game theory x = I. The student can be one of two types: 0= L or 0= H. The PhD admission officer can observe the courses chosen by the student x = {A, I} but not the type of the student 0. Before observing the course chosen by the student, she believes both types are equally likely. She admits students only if she is sure that they are type 0 = H (that is if she believes P(0 = H|x) = 1). The student gets 10 units of utility from being admitted to a PhD and 0 units if not admitted, and pays costs c(0) if she chooses advanced game theory and costs 0 if she chooses introduction to game theory. We assume that c(H) = 0 < c(L) = 15. 1) How do we call a situation of asymmetric information in which the informed player moves first? What if the uninformed player moves first?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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