Two employees witness fraud committed in their firm. Each has two pure strategies: to become a whistleblower and report a crime, or not to report a crime. Each employee gets a payoff of 1 if the crime is reported by someone (it does not matter if both or only one employee reports). However, reporting the crime is costly. An employee who reports has to pay the cost of reporting equal to 0.5-0.25*d, where d=1 if the other employee also reports, and d=0 otherwise. Suppose that employees simultaneously decide to report or not. There is a unique mixed strategy Nash equilibrium in this game where each employee reports with the same positive probability less than 1. What is the probability that the crime is reported by at least one employee in such an equilibrium? ________

Two employees witness fraud committed in their firm. Each has two pure strategies: to become a whistleblower and report a crime, or not to report a crime. Each employee gets a payoff of 1 if the crime is reported by someone (it does not matter if both or only one employee reports). However, reporting the crime is costly. An employee who reports has to pay the cost of reporting equal to 0.5-0.25*d, where d=1 if the other employee also reports, and d=0 otherwise. Suppose that employees simultaneously decide to report or not. There is a unique mixed strategy Nash equilibrium in this game where each employee reports with the same positive probability less than 1. What is the probability that the crime is reported by at least one employee in such an equilibrium? ________

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.12P

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