Consider an extensive game. First, a firm in City 1 (Player 2) makes Betty (Player 1) a job offer. The offer promises an income y₁. Then Betty decides whether to accept the offer. If the offer is accepted, the payoffs to Betty and the firm are (y1x1, 11), where x₁ is the house price in City 1. While Betty is contemplating over this offer, she receives another job offer from a firm in City 2. This outside option promises an income of y2 and a house price x2. If Betty rejects Player 2's offer and accepts the outside option, the payoffs to the two players are (y2- If Betty rejects both offers, then the payoffs are (0,0). Assume y1 > x1, Y2 > x2, 0 < 1 < 1 and Y2 − x2 + x1 ≤ 1. Assume that Betty will accept an offer if she is indifferent from accepting and rejecting it. Do the following: - x2,0).

Consider an extensive game. First, a firm in City 1 (Player 2) makes Betty (Player 1) a job offer. The offer promises an income y₁. Then Betty decides whether to accept the offer. If the offer is accepted, the payoffs to Betty and the firm are (y1x1, 11), where x₁ is the house price in City 1. While Betty is contemplating over this offer, she receives another job offer from a firm in City 2. This outside option promises an income of y2 and a house price x2. If Betty rejects Player 2's offer and accepts the outside option, the payoffs to the two players are (y2- If Betty rejects both offers, then the payoffs are (0,0). Assume y1 > x1, Y2 > x2, 0 < 1 < 1 and Y2 − x2 + x1 ≤ 1. Assume that Betty will accept an offer if she is indifferent from accepting and rejecting it. Do the following: - x2,0).

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 15.1IP

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