Apr 5, 2011

Apr 5, 2011 - April 5 2011 Lecture 23(Last Lecture Trust...

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{ $2,500 for HW Student $5,000 for Lazy Student (Utility; NOT Tuition) where the second bidder has to pay his/ her bid (own bid) Trust Game: -Suppose you are given $10 and are told to contribute to a project that has a 300% return, but it goes to someone else in the room - Now this person has a choice of returning the $10 to A (you) -In a Subgame Nash Equilibrium, Player A would keep the $10 and not invest -However, when this was tested in a lab, a lot of people did give the money to Player B (project) Dollar Auction: - Read Poundhouse; about Britain and France in arms race in 1800 ʼ s; similar to $ auction -Suppose that there are two players in a Dollar Auction -Player one can go as high $1.36; so if P1 bids 0.36, P2 will walk away; -this is because if P2 decides to go higher, then P1 will bid their limit, $1.36 Screening & Signaling: -Is it possible to separate types (i.e. Lazy vs. Hardworking) -Is it possible to signal these types? through their behavior? Example: Let ʼ s take the types Lazy and Hardworking -Suppose there is a Job Fair at the University; the employer wants Hardworking students and wants to weed out the Lazy ones -This can be done several ways; ±rst they ʼ ll look at the student ʼ s grades; but both students may have outstanding grades; the next thing to look at would be the kinds of courses the student took; a Hardworking student would ʼ ve taken more tough courses and done better in them; however a Lazy student may have the ability to take the same courses and do equally good with less effort; therefore there would be yet another test, and so on. ... -We should also look at why Lazy students would have a smaller incentive to take tougher courses:
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Apr 5, 2011 - April 5 2011 Lecture 23(Last Lecture Trust...

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