Question 4 Customs agents must choose when to allocate their scarce resources to stop smugglers from bringing harmful drugs into the country. Due to budget constraints, the agents must choose on each day whether to have high surveillance in the AM or PM. Smugglers choose whether to attempt to enter in the AM or PM. Payoffs are given in the table below. Customs Agents AM PM Smugglers AM -10, 10 20,0 PM 20,0 -10, 10 O If this were a sequential game, then there would be a second-mover advantage. O If Customs Agents choose AM with probability 70%, then the Smugglers' best response would be a pure strategy. O In equilibrium, Smugglers and Customs Agents both choose AM with probability 50%. O All of these responses are true.

Question 4 Customs agents must choose when to allocate their scarce resources to stop smugglers from bringing harmful drugs into the country. Due to budget constraints, the agents must choose on each day whether to have high surveillance in the AM or PM. Smugglers choose whether to attempt to enter in the AM or PM. Payoffs are given in the table below. Customs Agents AM PM Smugglers AM -10, 10 20,0 PM 20,0 -10, 10 O If this were a sequential game, then there would be a second-mover advantage. O If Customs Agents choose AM with probability 70%, then the Smugglers' best response would be a pure strategy. O In equilibrium, Smugglers and Customs Agents both choose AM with probability 50%. O All of these responses are true.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter18: Asymmetric Information

Section: Chapter Questions

Problem 18.7P

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