Exam 16: Dynamic Games With Incomplete Information

-Consider the Spence Education Game depicted in Figure 16.4. In the figure, all payoffs are in thousands of dollars per month. Suppose 30 percent of workers are low- productivity (LP) workers and 70 percent are high-productivity (HP) workers. Using pre- employment testing, the firm has determined that there is a 60 percent probability of hiring a high-school (HS) graduate who is also a high-productivity worker and a 75 percent probability of hiring a college (C) graduate who is a high-productivity worker. What is the firm's conditional expected payoff from hiring a college graduate?

-Refer to Figure 16.1, which represents a static game in extensive format. The following decision nodes constitute an invalid information set:

-Consider the static oil-drilling game depicted in Figure 16.2. The payoffs to both players from Nash equilibrium strategy profile for this game are:

Screening occurs when a player:

-Refer to Figure 16.1, which represents a static game in extensive format. The Nash equilibrium strategy profile for this game is:

-Consider the Spence Education Game depicted in Figure 16.3. In the figure, all payoffs are in thousands of dollars per month. Suppose that 70 percent of all workers are low- productivity (LP) workers and 30 percent are high-productivity (HP) workers. Using pre- employment testing, the firm has determined that there is a 60 percent probability of hiring a high-school (HS) graduate who is also a high-productivity worker and a 75 percent probability of hiring a college (C) graduate who is a high-productivity worker. What is the firm's conditional expected payoff from hiring a high school graduate?

-Consider the Spence Education Game depicted in Figure 16.4. In the figure, all payoffs are in thousands of dollars per month. Suppose that Nature moves first and determines that there is a 30 percent of workers are low-productivity (LP) workers and 70 percent are high-productivity (HP) workers. The firm has determined that there is a 60 percent probability of hiring a high-school (HS) graduate who is also a high-productivity worker and a 75 percent probability of hiring a college (C) graduate who is a high-productivity worker. What is the optimal hiring strategy of a risk-neutral firm?

Perfect recall:

Self-selection occurs when players:

-Refer to Figure 16.1, which represents a static game in extensive format. The following decision nodes constitute a valid information set:

-Consider the Spence Education Game depicted in Figure 16.4. In the figure, all payoffs are in thousands of dollars per month. Suppose that 30 percent of workers are low- productivity (LP) workers and 70 percent are high-productivity (HP) workers. Using pre- employment testing, the firm has determined that there is a 60 percent probability of hiring a high-school (HS) graduate who is also a high-productivity worker and a 75 percent probability of hiring a college (C) graduate who is a high-productivity worker. What is the probability that the firm will hire a high-productivity, college graduate?

-Consider the Spence Education Game depicted in Figure 16.3. In the figure, all payoffs are in thousands of dollars per month. Suppose that 70 percent of all workers are low- productivity (LP) workers and 30 percent are high-productivity (HP) workers. Using pre- employment testing, the firm has determined that there is a 60 percent probability of hiring a high-school (HS) graduate who is also a high-productivity worker and a 75 percent probability of hiring a college (C) graduate who is a high-productivity worker. What is the probability that the firm will hire a high-productivity worker who is a high school graduate?

-Consider the static oil-drilling game depicted in Figure 16.2. This game is an example of :

A player who cannot distinguish among decisions nodes at a stage of a dynamic games is: