and Leona were each presented with the following independent offers. If one confesses and the other doesn't, the one who confesses will go free and the other will receive a 20-year prison sentence; if both confess, each will receive a 10-year prison sentence. Bernie and Leona both know that without any con- fessions, the police only have enough evidence to convict them of the lesser crime of tax evasion, and each would then receive a 2-year prison sentence. m. Use the information to construct a payoff matrix for Bernie and Leona. b. What is the dominant strategy for Bernie and for Leona? Why? c. Based on your response to the previous question, what prison sentence will each receive?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Game 1: Pricing
Firm A
Price
high
Ann (A)
Price
low
Game 2: Chicken
Swerve
Do not
swerve
A FIGURE 2
Price high
(15, 15)
(25, 2)
Swerve
(5,5)
Firm B
(10,3)
Bob (B)
Price low
(2,25)
(5,5)
Do not
swerve
(3, 10)
(-10,-10)
and Leona were each presented with the following
independent offers. If one confesses and the other
doesn't, the one who confesses will go free and the other
will receive a 20-year prison sentence; if both confess,
each will receive a 10-year prison sentence.
Bernie and Leona both know that without any con-
fessions, the police only have enough evidence to convict
them of the lesser crime of tax evasion, and each would
then receive a 2-year prison sentence.
a. Use the information to construct a payoff matrix for
Bernie and Leona.
ghb. What is the dominant strategy for Bernie and for Leona?
Why?
dac. Based on your response to the previous question, what
prison sentence will each receive?
Transcribed Image Text:Game 1: Pricing Firm A Price high Ann (A) Price low Game 2: Chicken Swerve Do not swerve A FIGURE 2 Price high (15, 15) (25, 2) Swerve (5,5) Firm B (10,3) Bob (B) Price low (2,25) (5,5) Do not swerve (3, 10) (-10,-10) and Leona were each presented with the following independent offers. If one confesses and the other doesn't, the one who confesses will go free and the other will receive a 20-year prison sentence; if both confess, each will receive a 10-year prison sentence. Bernie and Leona both know that without any con- fessions, the police only have enough evidence to convict them of the lesser crime of tax evasion, and each would then receive a 2-year prison sentence. a. Use the information to construct a payoff matrix for Bernie and Leona. ghb. What is the dominant strategy for Bernie and for Leona? Why? dac. Based on your response to the previous question, what prison sentence will each receive?
Bernie and Leona were arrested for money laundering
and were interrogated separately by the police. Bernie
Transcribed Image Text:Bernie and Leona were arrested for money laundering and were interrogated separately by the police. Bernie
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