please only do: if you can teach explain each part A small business owner can invest any amount of effort e > 0 to produce output valued at2e. The cost to the owner of effort level e is e². The government, which seeks to maximizeits own revenue, may expropriate some fraction 7 € [0, 1] of the owner's output. The owner'spayoff to choosing e if the government expropriates fraction 7 is 2e(1-7) - e².(a) Consider a sequential game in which the owner first chooses e and the government chooses7 after observing the owner's choice. Find all subgame perfect equilibria of this game.(b) Now consider a sequential game in which the government first chooses 7 and the ownerchooses e after observing the government's choice. Find all subgame perfect equilibriaof this game.

Value of product = 2e Cost of production = e2 Government expropriates a fraction = 2e (1-t ) - e2 In…

A small business owner can invest any amount of effort e ≥ 0 to produce output valued at 2e. The cost to the owner of effort level e is e². The government, which seeks to maximize its own revenue, may expropriate some fraction 7 € [0, 1] of the owner's output. The owner's payoff to choosing e if the government expropriates fraction 7 is 2e(1-7) - ².

A small business owner can invest any amount of effort e ≥ 0 to produce output valued at 2e. The cost to the owner of effort level e is e². The government, which seeks to maximize its own revenue, may expropriate some fraction 7 € [0, 1] of the owner's output. The owner's payoff to choosing e if the government expropriates fraction 7 is 2e(1-7) - ².

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 3MC

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sc. te Con oa S Payn Comp able for discrete con cto . C Enetor 76 Fiid A Given P (Round to the neare T Find AIP acceptable. O8929 0.7972 07118 0 6355 0.5674 0 5066 0.4523 0,4039 0 3606 10000 21200 O 8929 1.1200 0.5917 1 1.1200 1,0000 0.4717 16901 2 4018 1.2544 0 2963 0.4163 B3744 47798 1.4049 1.5735 1.7623 1.9738 3 30373 0.2092 0.3292 3.6048 4.1114 4.5638 0.2774 6.3528 8 1152 10.0390 12.2997 14 7757 0.1574 0.1232 0.0991 0.2432 6. 0.2191 7 2.2107 0.0813 0.2013 4.9676 5.3282 5.6502 8 2.4760 0.1877 0.1770 0.0677 6. 2.7731 0.3220 17.5487 0.0570 10 3.1058 Print Done
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