The state of the world is known only to player 1. Player 2 only knows that the probabilityof each state is 1/2. In equilibrium we have to describe player 1’s strategy,which is a function of the state, as well as player 2’s strategy.
(a) Show that the only equilibrium (with pure strategies) of the game involves bothtypes of player 1 choosing D and player 2 choosing L.
(b) Show that were player 2 to also know the state of the world, the expectedequilibrium payoffs to both players would be lower!
please answer, and then explain why
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