Q4. Please answer all the questions a) and b) with steps, thank you !!!! 4. Ther
ID: 1104194 • Letter: Q
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Q4. Please answer all the questions a) and b) with steps, thank you !!!!
4. There are one firm and two types (low-ability and high-ability) of workers. The cost of attending a college is $8,000 for a high-ability person and S20,000 for a low-ability person. The value of high and low ability workers for the firm is S50,000 and $30,000 respectively. The proportion of each type in the population is 1/2. Available actions for the firm are: Fl: Pay S32,500 regardless of worker's college educatioin F2: Pay S40,000 for college graduates and S25,000 for those who do not attend a college Available actions for a low-ability worker are: LI: Attend a college L2: Not attend a college Available actions for a high-ability worker are: H1: Attend a college H2: Not attend a college a. What is a Nash equilibrium? What is this equilibrium called? b. Suppose one action for the firm (F1) is replaced by Pay $25,000 regardless of worker's college education. What is a Nash equilibrium? What is this equilibrium called?Explanation / Answer
a) The Nash Equilibrium is a concept of game theory where the optimal outcome of a game is one where no player has an incentive to deviate from his chosen strategy after considering an opponent's choice. Overall, an individual can receive no incremental benefit from changing actions, assuming other players remain constant in their strategies. A game may have multiple Nash Equilibria or none at all.
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