> 2. Bargaining under incomplete information, allowing for general valuations. Consider a bargaining game between a seller and a buyer we described in class, but assume that the buyer's valuation for the object is either high, vh, with probability a [0, 1], and low, vt, with probability 1 q; where vH > VI > 0. The seller does not observe the buyer's valuation, but knows that it's distributed according to the above probabilities. The seller is the first mover in this game, and without observing the realization of the buyer's valuation, he sets a price p for the good. Observing this price, but observing his valuation for the object (vH or v1), the buyer responds accepting or rejecting the deal. 7 (a) Buyer's response. Since the buyer is the privately informed player in this game, identify his best response: first, when his valuation is vH, and, second, when his valuation is vl. (b) Seller's price. Find the price that the seller sets in the BNE of the game. (Hint: You should find two BNEs.] (c) How are the BNEs you identified in part (b) affected by an increase in vH? And by an increase in ul? Interpret. V > 2. Bargaining under incomplete information, allowing for general valuations. Consider a bargaining game between a seller and a buyer we described in class, but assume that the buyer's valuation for the object is either high, vh, with probability a [0, 1], and low, vt, with probability 1 q; where vH > VI > 0. The seller does not observe the buyer's valuation, but knows that it's distributed according to the above probabilities. The seller is the first mover in this game, and without observing the realization of the buyer's valuation, he sets a price p for the good. Observing this price, but observing his valuation for the object (vH or v1), the buyer responds accepting or rejecting the deal. 7 (a) Buyer's response. Since the buyer is the privately informed player in this game, identify his best response: first, when his valuation is vH, and, second, when his valuation is vl. (b) Seller's price. Find the price that the seller sets in the BNE of the game. (Hint: You should find two BNEs.] (c) How are the BNEs you identified in part (b) affected by an increase in vH? And by an increase in ul? Interpret. V