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Consider the corporate leniency game discussed in lecture. Table 1 Do Not Apply -200,-200 - F Apply Apply F F -200 2 -200 - F,-200
Consider the corporate leniency game discussed in lecture. Table 1 Do Not Apply -200,-200 - F Apply Apply F F -200 2 -200 - F,-200 ;-200 Do Not Apply (1 w)450 + w(-200 F), (1 w)450 + w(-200 F) a) (2 pts.) The European Union has adopted a policy that firms found guilty of collusive behaviour should pay only damages and no fines, i.e., F = 0. Calculate the range of values for the probability of prosecution w for which (Do Not Apply, Do Not Apply) is a pure strategy Nash equilibrium. Show ALL STEPS. b) (2 pts.) Briefly describe the implications of your result in part a) on the policy effectiveness of the corporate leniency program in the European Union. c) (2 pts.) Calculate the range of values of the fine F, for which (Apply, Apply) is a pure strategy Nash equilibrium. Show ALL STEPS. d) (2 pts.) Briefly describe the implications of your result in part c) on the policy effectiveness of the corporate leniency program in the European Union. e) (2 pts.) Briefly summarize the consequences of implementing the corporate leniency program under the no fines constraint. f) (2 pts.) Briefly describe the implications of introducing a small fine under a legal system, in which each case results in successful prosecution. Consider the corporate leniency game discussed in lecture. Table 1 Do Not Apply -200,-200 - F Apply Apply F F -200 2 -200 - F,-200 ;-200 Do Not Apply (1 w)450 + w(-200 F), (1 w)450 + w(-200 F) a) (2 pts.) The European Union has adopted a policy that firms found guilty of collusive behaviour should pay only damages and no fines, i.e., F = 0. Calculate the range of values for the probability of prosecution w for which (Do Not Apply, Do Not Apply) is a pure strategy Nash equilibrium. Show ALL STEPS. b) (2 pts.) Briefly describe the implications of your result in part a) on the policy effectiveness of the corporate leniency program in the European Union. c) (2 pts.) Calculate the range of values of the fine F, for which (Apply, Apply) is a pure strategy Nash equilibrium. Show ALL STEPS. d) (2 pts.) Briefly describe the implications of your result in part c) on the policy effectiveness of the corporate leniency program in the European Union. e) (2 pts.) Briefly summarize the consequences of implementing the corporate leniency program under the no fines constraint. f) (2 pts.) Briefly describe the implications of introducing a small fine under a legal system, in which each case results in successful prosecution
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