Return to the situation in Exercise S7, where Tudor’s low
per-unit cost is 6.
(b) What is the equilibrium when z = 0.1? Is it
separating, pooling, or semi separating?
(c) Repeat part (b) for z = 0.2.
(d) Repeat part (b) for z = 0.3.
(e) Compare your answers in parts (b), (c), and (d) of
this problem with part (d) of Exercise U5. When Tudor’s low cost is 6 instead
of 10, can pooling equilibria be achieved at lower values of z? Or are higher
values of z required for pooling equilibria to occur? Explain intuitively why
this is the case.