Find a babbling perfect bayesian equilibrium

Reference no: EM131252386

Stockbrokers: A stockbroker can give his client one of three recommendations regarding a certain stock: buy (B), hold (H), or sell (S). The stock can be one of three kinds: a winner (W), mediocre (M), or a loser (L). The stockbroker knows the type of stock but the client knows only that each type is equally likely.

The game proceeds as follows: first, the stockbroker makes a recommendation a₁∈ {B,H,S}to the client, after which the client chooses an action a₂ ∈ {B, H, S} and payoffs are determined. The payoffs to the stockbroker (player 1) and client (player 2) depend on the type of stock and the action taken by the client (the pairs are (v₁, v₂), where v_iis player i's payoff) as follows:

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a. Find a babbling perfect Bayesian equilibrium of this game.

b. Is there a fully truthful perfect Bayesian equilibrium in which the stockbroker makes the recommendation that, if followed, maximizes the client's payoff?

c. What is the most informative perfect Bayesian equilibrium of this game?

Reference no: EM131252386

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