Sub: Economics

Topic: Micro Economics

Question: Examples of game theory.

ClassOf1 provides exert guidance for College, Graduate and High school homework and live online tutoring on subjects like Finance, Marketing, Statistics, Economics and others. Check out more solved problems in our Solution Library.

Two Executives were arrested by authorities for embezzling money from their firm. Short of a confession, the prosecutor only had enough evidence to put them away for 10 years. Given a confession, however, she was sertain to put them behind bars for life wothout parole, since they killed a law enforcement officer who was investigationt he case. The prosecutor put them two prisoners in separate rooms, and told them the following: ‘If you confess and you partner does not, I’ll give you a year’s probated sentence but put your partner in the slammer for life without parole. Of course, if your partner confesses and you don’t, you’ll get the life sentence 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 executives to confess? Explain. b. Would your answer change if the life sentence carried the possibility of parole? Explain.

www.classof1.com

*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same in
lieu of your academic submissions for grades.

Sub: Economics

Topic: Micro Economics

Solution:

(a) Yes, the prosecutor’s bargain will induce the two executives to confess because if they accept the crime, will get only 10 years of punishment. At the same time, if they don’t confess, they have to bear life time imprisonment without parole. (b) Yes, if the sentence carried possibility of parole both the offenders don’t confess the crime, because there is a possibility of parole ** End of the Solution **

ClassOf1 provides exert guidance for College, Graduate and High school homework and live online tutoring on subjects like Finance, Marketing, Statistics, Economics and others. Check out more solved problems in our Solution Library.

www.classof1.com

*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same in
lieu of your academic submissions for grades.