Sub: Economics Topic: Micro Economics
The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same inlieu of your academic submissions for grades.
Examples of game theory.
Two Executives were arrested by authorities for embezzling money from their firm. Short of aconfession, the prosecutor only had enough evidence to put them away for 10 years. Given aconfession, however, she was sertain to put them behind bars for life wothout parole, sincethey killed a law enforcement officer who was investigationt he case. The prosecutor put themtwo prisoners in separ
ate rooms, and told them the following: ‘If you confess and you partnerdoes not, I’ll give you a year’s probated sentence but put your partner in the slammer for lifewithout parole. Of course, if your partner confesses and you don’t,
you’ll get the life
without parole and he’ll get one year’s probation.
I must warn you, however, that if you both
confess I will have enough evidence to put you both away for life without parole.”
a. Do you think the prosecutor’s bargain will induce the two executi
ves to confess? Explain.b. Would your answer change if the life sentence carried the possibility of parole? Explain.