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Econ assessment 4

# Econ assessment 4 - Amal Radia Econ 395 Assessable Set 4...

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If he receives a “high signal,” his posterior distribution over the possible values would either be \$300, or \$400, each occurring with a 0.50 probability. His expected value of the asset, conditional on his private information of a high signal would be (.50)(300) + (.5)(400) = \$350.00 If he receives a “low signal,” then his posterior distribution over the possible values would either be \$100 or \$200, each occurring with a 0.50 probability. His expected value of the asset, conditional on receiving a low signal, would be (.5)(100) + (.5)(200) = \$150. (b) If Eve receives a “square” signal, what is her posterior distribution over possible values of the asset? What is her expected value of the asset, conditional on her private information? If she receives a “non-square” signal, what is Eve’s posterior distribution over possible values of the asset? What is her expected value of the asset, conditional on his private information?
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