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Is the elasticity-version required here? I'm not so sure! We know the direction of the income effect (as we're told it's an inferior good) so it's easy to argue the only explanation is that the substitution effect has dominated?
@HerrK. - thank you for the comment, I've spoken to a few people and it's agreed the question is wrong (but your comment about off-the-equilibrium path is right and useful in general). Do you have any good reading/examples for sequential equilibrium and actually "doing it" rather than seeing the definition of the sequence of strategies, etc, etc?
So on that slideshow it still says "WPBE also requires specification of (any) beliefs and an optimal action in H such that Pr ob(H | δ∗) = 0" which is in line with my understanding (i.e. still needs to be optimal off-the-equilibrium path.
