Lecture18 - Lecture XVIII Games with Incomplete Information II More Examples Markus M M¨obius May 6 2004 • Gibbons section 4.2 • Osborne

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Unformatted text preview: Lecture XVIII: Games with Incomplete Information II - More Examples Markus M. M¨obius May 6, 2004 • Gibbons, section 4.2 • Osborne, chapter 10 1 Introduction This lecture gives more examples of games of incomplete information, in particular signalling games. 2 The Lobbying Game We consider the following model of lobbying. • Nature chooses whether the lobbyist’s industry is headed for Good or Bad times and reveals the state of the world { G,B } to the lobbyist. • The a priori probability of Good times is p . • The Lobbyist can then send a message to Congress. Following this message, Congress chooses whether or not to enact a subsidy. Let { S,N } denote the actions available to Congress. At the end of the period, the state of the world is revealed to Congress. • A subsidy costs Congress k . It generates a return r > k for Congress if and only if times are Bad. We assume that (1- p ) r < k . 1 • The Lobbyist gets a payoff of zero if the subsidy is not passed, a payoff of 1 if the subsidy passes and times are Bad, and a subsidy of 1/2 if...
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This note was uploaded on 05/19/2010 for the course DFDAS 220 taught by Professor Ding during the Fall '10 term at Academy of Art University.

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Lecture18 - Lecture XVIII Games with Incomplete Information II More Examples Markus M M¨obius May 6 2004 • Gibbons section 4.2 • Osborne

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