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Unformatted text preview: (so that his payo/ is $20 & $10 = $10) : If Alex doesnt declare and an inspection is carried out the CBSA will conscate his bottle of whiskey and ne him $10 (payo/ will be & $10 ). An inspection costs the agency $5 . Any duties or nes paid by Alex go to the CBSA as revenues (contribute to the CBSA payo/s). The bottle of whiskey is poured down the drain (does not contribute to CBSA payo/s). (a) Show the normal form of this game (the game matrix or table) and identify best responses of both players (5 marks) 1 (b) Find a Nash equilibrium to this game. (8 marks) (c) Suppose the game is sequential. Alex &rst chooses whether or not to Declare. Brenda, after observing Alexs choice, then decides whether or not to inspect. Draw the game tree to the sequential game and use backward induction to identify the Subgame Perfect Nash Equilibrium. (7 marks) 2...
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- Spring '10