1. Game Theory
Game 5
Mixed Strategies

2. No Equilibrium 1
shirk p
1/10
work
1/2 1
no monitor q
monitor

3. Class Results shirk p work no monitor q monitor 1 Shirk: p=0.23
1/10
work
1/2 1
no monitor q
monitor

4. Class Results Got away with shirking 100 Got caught shirking 0 Shrey
Xue
Joe

5. Class Results Lucky to have monitored -10
(but probably don’t feel too lucky)
Connor
Tony

6. Class Results
Should have monitored
Sonny

7. Best Responses
What should managers have done given that 23% of employees shirk?
What should workers have done given that they had a 91% chance of being monitored?

8. Class Results For managers: For employees:
Monitor: (0.77)- 10(0.23) = 67
No Mon: 100(0.77)-100(0.23) = 54
Monitoring is a best reply
For employees:
Work: 50(0.91)+ 50(0.09) = 50
Shirk: 0(0.91)+100(0.09) = 9
Working is a best reply

9. Summary Managers should monitor Employees should work
Is this sustainable?
What would happen next time?

10. Cost Change Monitoring cost increases from 10 to 50
Monitoring decreased from 91% to 60%
Shirking increased from 23% to 31%
Only Edward got away with it