Return to the game with two neighbors. Continue to suppose that player i ’s average benefit per hour…
Return to the game with two neighbors. Continue to suppose that player i ’s average benefit per hour of work on landscaping is
Continue to suppose that player 2’s opportunity cost of an hour of landscaping work is 4. Suppose that 1’s opportunity cost is either 3 or 5 with equal probability and that this cost is 1’s private information.
a. Solve for the Bayesian-Nash equilibrium.
b. Indicate the Bayesian-Nash equilibrium on a best-response function diagram.
c. Which type of player 1 would like to send a truthful signal to 2 if it could? Which type would like to hide its private information?
