Question: I'm struggling with question 1.4. Can you please explain how to approach it? ECON2112 Game Theory 85 Business Strategy Problem Set 6 1 Mark and

I'm struggling with question 1.4. Can you please explain how to approach it?

I'm struggling with question 1.4. Can you please explain how to approachit? ECON2112 Game Theory 85 Business Strategy Problem Set 6 1 Mark

ECON2112 Game Theory 85 Business Strategy Problem Set 6 1 Mark and Jason are playing the game depicted in Figure 1. Call 6 = left and H = right the two possible states (or types of M) in the obvious way. That is, Pr (9 = r) = p, with p assumed to be strictly between 0 and 1. They are very shy, so they refused to tell me their payo's, but Jason told me that he would play A only if he thought that M is of type i with probability at least %. For this exercise, you should apply Bayes' rule as you were told to do by your tutors. 1.1 Suppose that everybody knows that M plays the fol- lowing strategy: a if 9 = 1" 9 = ' sl ) {6 its 2 I. J is told that M played bthat is, the information set at which J moves has been reached. What should J believe about 6'? Dene 0(6) 5 Pr(M plays 5 | 3} . That is, a (7') is the probability that M plays 5 ifthe state is r and 0(1) is the probability that 1111 plays 5 if the state is I. Figure 1: Mark and Jason 1.2 Suppose that everybody knows that M plays a strat- egy 0(6) such that 0(3'") 2 0(1) 2 0. J is told that M played bthat is, the information set at which J moves has been reached. What should J believe about 6? 1.3 You are told that J believes that M is more likely to be of type I if he has played I) than if he has played a. What does this imply about 00!") and 00!)? 1.4 You are told that, after using Bayes' rule correctly, J weakly prefers to play A. What does this imply about 0(1\") and 0(1)

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