Game #2: Bribe or Don’t Bribe The above game repsesents the interaction between
ID: 3317664 • Letter: G
Question
Game #2: Bribe or Don’t Bribe
The above game repsesents the interaction between a businessman and a politician. The businessman maximizes profits, and the politician maximizes the probability that he will be re-elected to office. The businessman wants to persuade the politician to give him a monopoly in a certain industry. If he gets the monopoly, the businessman makes $10 million in profits. He is considering contributing $1 million to the re-election campaign of the politician, to try to persuade her to give him the monopoly. However, this kind of transaction is illegal, so they cannot write a contract on it. Assume that his opportunity cost is zero. As for the politician, the probability that she is reelected if she does nothing is 0.5. If she gives the monopoly to the businessman, this reduces her probability of reelection by 0.5, as she is perceived by the public as being corrupt. If she gets a campaign contribution of $1,000,000, her probability of being re-elected increases by 0.5. Fill in the payoff matrix (below). Explain your choices.
POLITICIAN
Bribe
Don’t Bribe
BUSINESS
Bribe
*
0.5
*
1
Don't Bribe
*
0
0
0.5
POLITICIAN
Bribe
Don’t Bribe
BUSINESS
Bribe
*
0.5
*
1
Don't Bribe
*
0
0
0.5
Explanation / Answer
There is no Nash Equilibrium as there is not one single cell that has the dominant strategies for both the businessman and the politician.
Business Politician Give Don't give Bribe 1,0.5 0,1 Don't bribe 1,0 0,0.5Related Questions
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