Question: Problem 1 . ( 8 points ) Reporting a crime with unknown number of witnesses. Consider a variant of problem 2 in Problem Set 6
Problem points Reporting a crime with unknown number of witnesses. Consider a variant of problem in Problem Set There are two players, each of whom does not know if she is the only witness to a crime, or if there is another witness. Let denote the probability each witness assigns to being the sole witness. There are possible states: only player witnesses the crime, only player witnesses the crimes, and both players witness the crime. To be clear. We know that both players witnessed the crime. But they dont The players must simultaneously decide whether to call the police C or not N Each player who reports incurs a cost c Both players assign a value v c to the police being informed. Only one player need come forward for this to occur. Hence, reporting agents receive a payoff of v c and nonreporting agents receive a payoff of v if the other agent reports and otherwise. Find a condition on under which the game has a pure strategy Nash equilibrium in which both players call the police. When the condition is violated, find the symmetric mixed strategy Nash equilibrium of the game.
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