Answer to Question #191838 in Microeconomics for Dhritabrata Paul

Question

Consider the following game of advice between the government and the Chief Economist. Let te T = [0, 1] be the state of the world drawn by Nature using the uniform distribution. The true value of t is revealed to the Chief Economist (CE) but not to the Government (G). The CE then sends a policy advice message m that can be any subset of the state space T. Upon receiving this message G takes implements a policy a ER. The payoffs of the two players are ug = 100 - (a - t)? and UCE = 200 - (a - (t+b))2 where b> is the CE's preference bias. (1) Define a messaging strategy in general for the CE. Use that definition to indicate when such a strategy is (a) fully informative and (b) babbling. (2) When do we say that the messaging strategy is interval partitioning? For a fixed b>0 derive and discuss the most informative equilibrium.

Answer 1

(1.)

Messaging strategy in general refers to how you position or present yourself and the communication methods.

(i)

The messaging strategy is always informative when it consists of the components of the marketing strategy. The components include the key information, relevance message to audience and call for action.

(ii)

The messaging strategy is babbling when one doesn't have a compelling information.

(2)

We say the messaging is interval partitioning when it is dealing with historical data of ranges where tables and indexes are used. The data is created by database and inserted into partition.

$U^s(a,t)=-(a-t-b)^2$

$U^R(a,t)=-(a-t)^2$

In the most informative equilibrium one party has the information 9chief economist)while the other party (government) has the ability to act. The informed player then have the power to choose what to say and what not to say.