MBA%20405B%20PS%201-02-answered - University of Illinois...

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University of Illinois MBA Program John P. Conley Spring 2002 1 MBA 405B Problem set 1 Due: Monday, April 08, 2002, 5:00pm 1. There are three passengers on a ship sailing across the Atlantic who are carrying large sums of money. Suppose passenger A has $1000, passenger B has $1500 and passenger C has $2000. They each put their money in separate envelopes and give them to captain who puts them in a chest for safekeeping. One night the ship is caught in a storm and the chest is broken open. The captain picks up all the money the next day, but does not know much each of the three passengers gave him originally. He proposes the following solution. He asked each passenger to write down how much money they originally put into their envelope. They are to do this at the same time, without speaking to one another. If the numbers the agents write down add up to the total amount of money the captain picked up (assume he managed to find all $4500) then the captain gives each passenger what he claims he put in. Otherwise, the captain throws the money into ocean and the passengers get nothing. a. Write this out as a formal one-shot game. Note that there are three players (the passengers) and that the captain is just a mediator who defines the strategy spaces and payoff functions of the agents. I={A,B,C}; S i ={$0 to infinity} (same for all passengers) F i = $s i if s A + s B + s C = 4500 (same for all passengers) $0 otherwise b. Is truth telling a Nash equilibrium? Why or why not? Yes.
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This note was uploaded on 06/09/2008 for the course ECO 208w taught by Professor Landsburg during the Spring '08 term at Rochester.

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MBA%20405B%20PS%201-02-answered - University of Illinois...

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