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Jane and Bill are apprehended for a bank robbery. They are taken into separate rooms and questioned by the police about their involvement in the crime. The police tell them each that if they confess and turn the other person in, they will receive a fighter sentence. If they both confess, they will be each be sentenced to 30 years. If neither confesses, they will each receive a 20-year sentence. If only one confesses, the they will receive 15 years and the one who stayed silent will receive 35 years. **Table 10.7** below represents the choices available to Jane and Bill. If Jane trusts Bill to stay silent, what should she do? If Jane thinks that Bill will confess, what should she do? Does Jane have a dominant strategy? Does Bill have a dominant strategy? A = Confess; B = Stay Silent. (Each results entry lists Jane’s sentence first (in years), and Bill’s sentence second.)

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# Chapter 10 Solutions

Principles of Economics 2e

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Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)

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Principles of Accounting Volume 1

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- The police have apprehended two suspects for a crime. Since they don't have enough information to convict, they decide to extract a confession from them by putting each suspect in a separate room and offering them the following deal: "If you Confess and your partner doesn't, I can promise you a reduced (one-year) sentence, and on the basis of your confession, your partner will get 10 years. "If you both Confess, you will each get a three-year sentence." Each suspect also knows that if neither of them confesses, the lack of evidence will cause them to be tried for a lesser crime for which they will receive two-year sentences. A player strategy in this game would be for: O these are all possible strategies O stay silent if the other player stays silent O confess no matter what the other player does confess if the other player confesses
*arrow_forward*Bob and Tom are two criminals who have been arrested for burglary. The police put Tom and Bob in separate cells. They offer to let Bob go free if he confesses to the crime and testifies against Tom. Bob also is told that he will serve a 15-year sentence if he remains silent while Tom confesses. If he confesses and Tom also confesses, they will each serve a 10-year sentence. Separately, the police make the same offer to Tom. Assume that if Bob and Tom both remain silent, the police only have enough evidence to convict them of a lesser crime and they will serve 3-year sentences. a. Use this information to complete the matrix below. Tom Don't confess Confess Don't confess Bob serves years Tom serves years Bob serves years Tom serves years Bob- Confess Bob serves years Tom serves years Bob serves years Tom serves years*arrow_forward*Tom and Jerry are each given one of two cards. One card is blank, while the other has a circle on it. A player can draw a circle on the blank card or erase the circle on one that has already been drawn. Tom and Jerry make their decision separately and hand in the card at the same time.Nobody wins anything unless the two cards are handed in with one and only one circle on them. The player who hands in the card with the circle receives $20, while the one who hands in the blank card receives $10. Answer the following questions. (1) Represent the game in strategic form.(2) Find the Nash equilibria of the game (in pure strategies).*arrow_forward* - John and Paul are walking in the woods one day when suddenly an angry bear emerges from the underbrush. They each can do one of two things: run away or stand and fight. If one of them runs away and the other fights, then the one who ran will get away unharmed (payoff of 0) while the one who fights will be killed (payoff -200). If they both run, then the bear will chase down one of them and eat them to death but the other one will get away unharmed. Assuming they don't know which one will escape we will call this a payoff of -100 for both. If they BOTH fight, then they will successfully drive off the bear but they may be injured in the process (payoff -20). Construct a payoff matrix for this game and identify the pure strategy Nash equilibrium. (Indicate it with words not with a circle!)
*arrow_forward*3.4 Bernie and Leona were arrested for money laundering and were interrogated separately by the police. Bernie 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 confessions, 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. 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?*arrow_forward*Susan and Thomas are playing a one-shot simultaneous move game an infinite time horizons. The payoffs matrix of the game played at each time period is Thomas R (3, 3) (13, 0) Susan (0, 13) (8,8) R. where the first number in each cell is the payoff to Susan and the second number is the payoff to Thomas. A trigger strategy of playing the Nash equilibrium forever if either agent deviates from the cooperative agreement will result in (R, R) being played at every time period so long as both agents' discount factors exceed: Check*arrow_forward* - C) Two people are suspected of robbing a bank. They are being interrogated in separate rooms. If both stay silent, they can be convicted of a lesser crime and sentenced to only 8 months. If one agreeds to confess that they did it together, he can plea bargain a suspended sentence while the other is convicted to 5 years in prison. If both confess that they did it together, each will receive a 3 year prison term. Create a payoff matrix from the point of view of the first suspect. Find the Nash equilibrium strategies for both suspects in this game.
*arrow_forward*Bernie and Leona were arrested for money laundering and were interrogated separately by the phone. Bernie and Leona were each presented with the following independent offers. If one confesses and the other doesn’t, then who confesses goes free and the other will receive a 20-year prison sentence; if both confess, each receives a 10-year prison sentence; and if neither confesses, each will only receive a 2-year prison sentence.a. Use the above information to construct a payoff matrix for Bernie and Leonab. Does either Bernie or Leona have a dominant strategy? Why or why not?c. Does a Nash equilibrium exist? Why or why not?*arrow_forward*While grading a final exam a professor discovers that two students have virtually identical answers. She talks to each student separately and tells them that she is sure that they shared answers, but she cannot be sure who copied from whom. She offers each student a deal-if they both sign a statement admitting to the cheating, each will be given an F for the course. If only one signs the statement, that student will be allowed to withdraw from the course and the other nonsigning student will be expelled from the university. Finally, if neither signs the statement they will both get a C for the course because the professor does not have enough evidence to prove that cheating has occurred. Assuming the students are not allowed to communicate with one another, set up the relevant payoff matrix. Beth doesn't sign Beth signs Beth: (Click to select) v Bob: (Click to select) v Beth: (Click to select) Bob: (Click to select) v Bob signs Beth: (Click to select) v Bob doesn't sign Bob: (Click to…*arrow_forward* - Two athletes of equal ability are competing for a prize of $12,000. Each is deciding whether to take a dangerous performance-enhancing drug. If one athlete takes the drug and the other does not, the one who takes the drug wins the prize. If both or neither take the drug, they tie and split the prize. Taking the drug imposes health risks that are equivalent to a loss of XX dollars. Complete the following payoff matrix describing the decisions the athletes face. Enter Player One's payoff on the left in each situation, Player Two's on the right. Player Two's Decision Take Drug Don't Take Drug Player One's Decision Take Drug , , Don't Take Drug , , True or False: The Nash equilibrium is taking the drug if X is greater than $6,000. True False Suppose there was a way to make the drug safer (that is, have lower XX). Which of the following statements are true about the effects of making the drug safer? Check all that…
*arrow_forward*Brett and Oliver are both going surfing. Each can choose between "North Beach" (N) and "South Beach" (S). North beach is better, but they both also prefer having the beach to themselves rather than sharing it with the other person. If Brett chooses N and Oliver N, the payoffs are (60, 60). If Brett chooses N and Oliver Chooses S, the payoffs are (70,30). If Brett chooses S and Oliver N the payoffs are (30,70). If they both choose S the payoffs are (20,20). Brett gets to choose first and tells Oliver, who then makes a decision. Which of the following is true? O The number of nash equillibrium in this game is less than the number of subgame perfect equillibrium O The number of nash equillibrium in this game is the same as the number of subgame perfect equillibrium O The number of nash equillibrium in this game is more than the number of subgame perfect equillibrium O There is no subgame perfect equilibrium in this game*arrow_forward*Matt and Lin are both math tutors. They know that if they collude and set a high price, both will earn a profit of 100; whereas if they both set a low price, both will earn a profit of 50. If one person sets a high price and the other person sets a low price, the person who sets a low price price gets a profit of 125 and the one with a high price gets a profit of 0. Fill in the payoffs in the normal-form game below where Lin is player 1 (represented by rows) and Matt is player 2 (represented by columns). Matt High Low Lin High Low*arrow_forward*

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- Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning