Two workers are on a production line. They each have two actions: exert effort, E, or shirk, S.Effort costs a worker e > 0 and shirking costs them nothing. If two workers do action E a lot ofoutput is produced and the workers earn £3 each. If only one worker chooses action E less outputis produced and they both earn £1. The workers earn nothing if they both shirk.(i) Describe this situation as a strategic form game (assuming the workers do not observe eachother's effort choice when making their own decision).(ii) For what values of e does this game have strictly dominant strategies?(iii) Describe the Nash equilibria of this game for e = 0,1, 2, 3.(iv) The workers now are re-arranged into a production line. First worker 1 moves and then worker2 moves. Worker 2 can now see worker l's effort level before they choose their effort. Drawthis extensive form game.(v) Find the subgame perfect equilibria of the production-line game for c =1/2 and c = 3/2.

In the above game - There are two players - Worker 1 & 2 Strategy set of worker 1 = Strategy…

Effort costs a worker e > 0 and shirking costs them nothing. If two workers do action E a lot output is produced and the workers earn £3 each. If only one worker chooses action E less outp s produced and they both earn £1. The workers earn nothing if they both shirk. (i) Describe this situation as a strategic form game (assuming the workers do not observe ead other's effort choice when making their own decision). (ii) For what values of c does this game have strictly dominant strategies? (iii) Describe the Nash equilibria of this game for e = 0, 1, 2, 3. (iv) The workers now are re-arranged into a production line. First worker 1 moves and then work 2 moves. Worker 2 can now see worker l's effort level before they choose their effort. Dra

Effort costs a worker e > 0 and shirking costs them nothing. If two workers do action E a lot output is produced and the workers earn £3 each. If only one worker chooses action E less outp s produced and they both earn £1. The workers earn nothing if they both shirk. (i) Describe this situation as a strategic form game (assuming the workers do not observe ead other's effort choice when making their own decision). (ii) For what values of c does this game have strictly dominant strategies? (iii) Describe the Nash equilibria of this game for e = 0, 1, 2, 3. (iv) The workers now are re-arranged into a production line. First worker 1 moves and then work 2 moves. Worker 2 can now see worker l's effort level before they choose their effort. Dra

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter7: Production, Costs, And Industry Structure

Section: Chapter Questions

Problem 25RQ: In choosing a production technology, how will firms react if one input becomes relatively more...

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In choosing a production technology, how will firms react if one input becomes relatively more expensive?
So is the answer C or D?
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