Return to the Tudor-Ford or problem from Section 6.C, when Tudor’s low per-unit cost is 10. Let z be

Return to the Tudor-Ford or problem from Section 6.C,
when Tudor’s low per-unit cost is 10. Let z be the probability that Tudor
actually has a low per-unit cost.

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Return to the Tudor-Ford or problem from Section 6.C, when Tudor’s low per-unit cost is 10. Let z be
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(a) Rewrite the table in Figure 8.10 in terms of z.

(b) How many pure-strategy equilibria are there when z =
0? What type of equilibrium (separating, pooling, or semi separating) occurs
when z = 0? Explain.

(c) How many pure-strategy equilibria are there when z =
1? What type of equilibrium (separating, pooling, or semi separating) occurs
when z = 1? Explain.

(d) What is the lowest value of z such that there is a
pooling equilibrium?

(e) Explain intuitively why the pooling equilibrium
cannot occur when the value of z is too low.

 

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