Econ3014 : game theory exercise 4 1.


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ECON3014 : GAME THEORY Exercise 4 1. Consider a competitive work chaffer delay a continuum of workers. Each worker is characterized by his productivity 2 fH; Lg. The adjustment of workers delay expression H is . Before applying for a job, each worker chooses the plane of his order e 0. The order is tall-priced and has no eect on productivity. If a worker delay productivity gets an order e and a wage ! his payois U(e; !; ) = ! ?? e2 : If a worker decides not to have-a-share in the job chaffer, he gets cipher payo. a) Argue that in the competitive chaffer, a wage hired to a worker correspondents to his expected productivity (bound on all the notice about this worker unconcealed to rms). b) What is the dierence among separating and pooling equilibria in this example? Find the separating makeweight delay the meanest potential order plane for the tall expression. c)What is the largest plane of order that can be separated by workers delay productivity H in makeweight in this example? d) Find a pooling makeweight in this example. e) Suppose the makeweight that you plant in b) is played. The legislation comes up delay a account that prohibits wage distinction domiciled on order (i.e. holding other publicly apparent workers' characteristics the identical, rms can not oer dierent stipend to crowd delay dierent order planes). To by the account, the legislation holds a referendum in which barely workers can signification. Assuming that significationrs signification zealously, i.e. significationrs extract an opinion that gives them the tallest payo, and that a isolated preponderance is required for bying the account, resolve a indispensable and sucient qualification for bying this account (the qualification must be formulated in provisions of fundamentals of the example) 2. Firm A (the acquirer") is regarding presentation aggravate rm T (the target"). It does not comprehend rm T's estimate; it believes that this estimate, when rm T is controlled by its own superintendence, is at lowest $0 and at most $100, and assigns correspondent presumption to each of the 101 dollar estimates in this rove. Firm...