Microeconomics Chapter 11 Game Theory

Microeconomics Chapter 11 Game Theory - confessor will go...

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Microeconomics Chapter 11 “Game Theory” 04/12/2007 14:31:00 Games and Strategic Behavior Cases in which relevant costs and benefits depend not only on the behavior  of the decision makers themselves but also on the behavior of others.  Prisoners Dilemma:    Two prisoners, X  and Y, are held in separate cells for a serious crime that  they did, in fact, commit. The prosecutor, however, has only enough hard evidence to convict them of a  minor offense, for which the penalty is, say, a year in jail. Each prisoner is told that if one confesses while the other remains silent, the 
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Unformatted text preview: confessor will go free while the other spends 20 years in prison. • If both people confess, then they will both get an intermediate sentence, say 5 years. • Their dominant strategy is to confess: o No matter what Y does, X gets a lighter sentence by speaking out. o If Y too confesses, X gets five years instead of twenty o If Y remains silent then X will walk free. o If they both stay silent they will serve a total of 2 years, but the difficulty is that everyone is self interested....
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This note was uploaded on 03/20/2008 for the course ECON 2306 taught by Professor Cloud during the Fall '07 term at UGA.

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