There are two players: an informed sender and an uninformed receiver. The receiver has to accept...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
There are two players: an informed sender and an uninformed receiver. The receiver has to accept or reject a sender's proposal, but does not know whether it is good or bad for her. The sender is informed about the state of the world: w = G for the good proposal and w= B for the bad proposal. From the perspective of the receiver, the proposal is good w = G with prior probability μ=3. The sender can claim (send a signal) that the proposal is good, signal g, or that the proposal is bad, signal b. The sender can commit to a signaling strategy: that is, before the state realizes, the sender commits to probabilities (g|G) and (g|B) of sending a good signal g, when the state is w = G and w = B, respectively.¹ The receiver gets the signal, updates her beliefs, and decides whether to accept or reject the proposal. The receiver gets the payoff of 1 when she either accepts a good proposal, or rejects a bad proposal; the receiver gets the payoff of 0 when she either accepts a bad proposal, or rejects a good proposal. Instead, the sender always wants his proposal to be accepted: the sender gets the payoff of 1 if the proposal is accepted by the receiver and the payoff of 0 if it is rejected. (a) Provide a real-world example which fits this persuasion framework. Examples include the prosecutor trying to convince the judge to convict the accused; the car dealer trying to persuade the customer to buy the car of unknown quality, etc. In the class, we showed that the optimal signaling strategy for the sender is: (g|G) = 1, that is, when the proposal is truly good, then the sender always sends a good signal; . n* (g|B) = 1, that is, when the proposal is truly bad, then the sender sends both signals with equal probability. (b) Suppose the sender uses the optimal signaling strategy n. Argue that if the receiver gets the bad signal b, when her posterior belief that the state is good is zero, that is, the receiver learns that the proposal is bad, and this rejects the proposal. (c) Suppose the sender uses the optimal signaling strategy n. Argue that if the reco gets the good signal g, when her posterior belief that the state is good is 1/2. And hence, the receiver will be exactly indifferent between accepting or rejecting the proposal, and accepting for her is optimal. There are two players: an informed sender and an uninformed receiver. The receiver has to accept or reject a sender's proposal, but does not know whether it is good or bad for her. The sender is informed about the state of the world: w = G for the good proposal and w= B for the bad proposal. From the perspective of the receiver, the proposal is good w = G with prior probability μ=3. The sender can claim (send a signal) that the proposal is good, signal g, or that the proposal is bad, signal b. The sender can commit to a signaling strategy: that is, before the state realizes, the sender commits to probabilities (g|G) and (g|B) of sending a good signal g, when the state is w = G and w = B, respectively.¹ The receiver gets the signal, updates her beliefs, and decides whether to accept or reject the proposal. The receiver gets the payoff of 1 when she either accepts a good proposal, or rejects a bad proposal; the receiver gets the payoff of 0 when she either accepts a bad proposal, or rejects a good proposal. Instead, the sender always wants his proposal to be accepted: the sender gets the payoff of 1 if the proposal is accepted by the receiver and the payoff of 0 if it is rejected. (a) Provide a real-world example which fits this persuasion framework. Examples include the prosecutor trying to convince the judge to convict the accused; the car dealer trying to persuade the customer to buy the car of unknown quality, etc. In the class, we showed that the optimal signaling strategy for the sender is: (g|G) = 1, that is, when the proposal is truly good, then the sender always sends a good signal; . n* (g|B) = 1, that is, when the proposal is truly bad, then the sender sends both signals with equal probability. (b) Suppose the sender uses the optimal signaling strategy n. Argue that if the receiver gets the bad signal b, when her posterior belief that the state is good is zero, that is, the receiver learns that the proposal is bad, and this rejects the proposal. (c) Suppose the sender uses the optimal signaling strategy n. Argue that if the reco gets the good signal g, when her posterior belief that the state is good is 1/2. And hence, the receiver will be exactly indifferent between accepting or rejecting the proposal, and accepting for her is optimal. There are two players: an informed sender and an uninformed receiver. The receiver has to accept or reject a sender's proposal, but does not know whether it is good or bad for her. The sender is informed about the state of the world: w = G for the good proposal and w= B for the bad proposal. From the perspective of the receiver, the proposal is good w = G with prior probability μ=3. The sender can claim (send a signal) that the proposal is good, signal g, or that the proposal is bad, signal b. The sender can commit to a signaling strategy: that is, before the state realizes, the sender commits to probabilities (g|G) and (g|B) of sending a good signal g, when the state is w = G and w = B, respectively.¹ The receiver gets the signal, updates her beliefs, and decides whether to accept or reject the proposal. The receiver gets the payoff of 1 when she either accepts a good proposal, or rejects a bad proposal; the receiver gets the payoff of 0 when she either accepts a bad proposal, or rejects a good proposal. Instead, the sender always wants his proposal to be accepted: the sender gets the payoff of 1 if the proposal is accepted by the receiver and the payoff of 0 if it is rejected. (a) Provide a real-world example which fits this persuasion framework. Examples include the prosecutor trying to convince the judge to convict the accused; the car dealer trying to persuade the customer to buy the car of unknown quality, etc. In the class, we showed that the optimal signaling strategy for the sender is: (g|G) = 1, that is, when the proposal is truly good, then the sender always sends a good signal; . n* (g|B) = 1, that is, when the proposal is truly bad, then the sender sends both signals with equal probability. (b) Suppose the sender uses the optimal signaling strategy n. Argue that if the receiver gets the bad signal b, when her posterior belief that the state is good is zero, that is, the receiver learns that the proposal is bad, and this rejects the proposal. (c) Suppose the sender uses the optimal signaling strategy n. Argue that if the reco gets the good signal g, when her posterior belief that the state is good is 1/2. And hence, the receiver will be exactly indifferent between accepting or rejecting the proposal, and accepting for her is optimal. There are two players: an informed sender and an uninformed receiver. The receiver has to accept or reject a sender's proposal, but does not know whether it is good or bad for her. The sender is informed about the state of the world: w = G for the good proposal and w= B for the bad proposal. From the perspective of the receiver, the proposal is good w = G with prior probability μ=3. The sender can claim (send a signal) that the proposal is good, signal g, or that the proposal is bad, signal b. The sender can commit to a signaling strategy: that is, before the state realizes, the sender commits to probabilities (g|G) and (g|B) of sending a good signal g, when the state is w = G and w = B, respectively.¹ The receiver gets the signal, updates her beliefs, and decides whether to accept or reject the proposal. The receiver gets the payoff of 1 when she either accepts a good proposal, or rejects a bad proposal; the receiver gets the payoff of 0 when she either accepts a bad proposal, or rejects a good proposal. Instead, the sender always wants his proposal to be accepted: the sender gets the payoff of 1 if the proposal is accepted by the receiver and the payoff of 0 if it is rejected. (a) Provide a real-world example which fits this persuasion framework. Examples include the prosecutor trying to convince the judge to convict the accused; the car dealer trying to persuade the customer to buy the car of unknown quality, etc. In the class, we showed that the optimal signaling strategy for the sender is: (g|G) = 1, that is, when the proposal is truly good, then the sender always sends a good signal; . n* (g|B) = 1, that is, when the proposal is truly bad, then the sender sends both signals with equal probability. (b) Suppose the sender uses the optimal signaling strategy n. Argue that if the receiver gets the bad signal b, when her posterior belief that the state is good is zero, that is, the receiver learns that the proposal is bad, and this rejects the proposal. (c) Suppose the sender uses the optimal signaling strategy n. Argue that if the reco gets the good signal g, when her posterior belief that the state is good is 1/2. And hence, the receiver will be exactly indifferent between accepting or rejecting the proposal, and accepting for her is optimal.
Expert Answer:
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date:
Students also viewed these economics questions
-
Before you begin this assignment, be sure you have read the UMUC Family Clinic Case Study below and your Week 1 and Week2 syllabus readings, which discuss EHR functionality and Process...
-
For each of the following situations, do the following: first describe whether it is a situation of moral hazard or of adverse selection. Then explain what inefficiency can arise from this situation...
-
Mr. and Mrs. Gresko started Gresko Toys in the early 1 960s. Initially, the company was small and few toys were produced. The talent and skills of Mr. Gresko were by far the major assets of the...
-
We often speak of how price rations goods. What are other rationing measures in clinics in which free care is provided?
-
Two tugboats pill a disabled supertanker. Each tug exerts a constant force of 1.80 X I (fN, one 14 west of north and the other 14 east of north, as they pull the tanker 0.75 km toward the north. What...
-
As given via the Internet, auto insurance quotes gathered online could vary from $470 to $1,081. A class 10 operator carries compulsory 10/20/5 insurance. He has the following optional coverage:...
-
Which of the following prevents a company from switching its inventory costing method to a different method each year? a. Disclosure principle b. Consistency principle C. Matching principle d....
-
The following transactions occurred during March 2013 for the Wainwright Corporation. The company owns and operates a wholesale warehouse. [These are the same transactions analyzed in Exercise 21,...
-
A project involves an investment in a fixed asset of 5,000 and an annual payment surplus of 2,000 for three years. (The first payment comes one year after the investment.) The investment is...
-
What characteristics of a property, plant, and equipment item make it different from other assets, such as accounts receivable or inventory?
-
Accounts Payable had a normal beginning balance of $ 5 0 0 . 5 0 0 . During the period, the company made purchases on account of $ 1 , 0 0 0 1 , 0 0 0 and paid cash on account of $ 4 0 0 . 4 0 0 ....
-
A ray traveling through a medium for which the index of refraction is \(n_{1}\) is incident on a medium for which the index of refraction is \(n_{2}\). At what angle of incidence \(\theta_{1}\),...
-
Assume an electron is fixed at the origin of a rectangular Cartesian coordinate system. Calculate the magnitude of the electric field at \(15 \mathrm{~mm}\) on the positive \(x\)-axis.
-
Joe Maddon has been the manager of the Chicago Cubs since 2015. In his first year, he exceeded the expectations of most analysts and fans by leading the team to an appearance in the National League...
-
Federal Express Corporation, now known as FedEx, was started in 1971 by Frederick W. Smith, an entrepreneur who recognized the need for a company that could deliver documents overnight. The company...
-
Determine the bus admittance matrix ( \(\boldsymbol{Y}_{\text {bus }}\) ) for the following power three phase system (note that some of the values have already been determined for you). Assume a...
-
The following stockholders' equity accounts, arranged alphabetically, are in the general ledger of Blue Spruce Corp. as of December 31, 2017. Common Stock ($2 declared value) $3,120,000 Paid-in...
-
Provide a few individual examples who revealed what aspects of emotional intelligence?
-
Barta entered into a written contract to buy the K&K Pharmacy, located in the local shopping center. Included in the contract was a provision stating that this Agreement shall be contingent upon...
-
On June 15, a newspaper columnist predicted that the coast of State X would be flooded on the following September 1. Relying on this pronouncement, Gullible quit his job and sold his property at a...
-
This is a stocklist case arising under 220(b) of our [Delaware] General Corporation Law. The issue is whether a shareholder states a proper purpose for inspection under our statute in seeking to...
-
A spring-mass system has a natural period of \(0.21 \mathrm{~s}\). What will be the new period if the spring constant is (a) increased by \(50 \%\) and (b) decreased by \(50 \%\) ?
-
An industrial press is mounted on a rubber pad to isolate it from its foundation. If the rubber pad is compressed \(5 \mathrm{~mm}\) by the self weight of the press, find the natural frequency of the...
-
Three springs and a mass are attached to a rigid, weightless bar \(P Q\) as shown in Fig. 2.51. Find the natural frequency of vibration of the system. 0000 0000 k 12. 13 m + FIGURE 2.51 Rigid bar...
Study smarter with the SolutionInn App