to 10 3. Suppose two neighbors 2 = 1.2 simultaneously must decide how many hours 5...
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to 10 3. Suppose two neighbors 2 = 1.2 simultaneously must decide how many hours 5 devote to the upkeep of their gardens. If they spend s, and s; hours, respectively, the payoff to neighbor is given by: us, sj,ti) = 10 Here, denotes neighbor 5 opportunity cost of garden upkeep. That is, is neighbor is type. (a) What is the pure-strategy Nash equilibrium if both neighbors have the same opportunity cost t = t = 4? Assume that they both know each other's types. (b) Suppose now that neighbor one's opportunity cost is private information, but that neighbor two believes that it is t = 3 or t = 5 with equal probability. Find the pure-strategy Bayesian Nash equilibrium. to 10 3. Suppose two neighbors 2 = 1.2 simultaneously must decide how many hours 5 devote to the upkeep of their gardens. If they spend s, and s; hours, respectively, the payoff to neighbor is given by: us, sj,ti) = 10 Here, denotes neighbor 5 opportunity cost of garden upkeep. That is, is neighbor is type. (a) What is the pure-strategy Nash equilibrium if both neighbors have the same opportunity cost t = t = 4? Assume that they both know each other's types. (b) Suppose now that neighbor one's opportunity cost is private information, but that neighbor two believes that it is t = 3 or t = 5 with equal probability. Find the pure-strategy Bayesian Nash equilibrium.
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