Question
Goldie's Mines hires miners to produce gold. In addition to earning income from royalties from a reality TV program on gold miners, Goldie's operation actually
Goldie's Mines hires miners to produce gold. In addition to earning income from royalties from a reality TV program on gold miners, Goldie's operation actually produces small nuggets (or flecks) of gold. This creates the opportunity for Goldie's miners to conceal gold nuggets (an activity known as "high grading"). Assume that, on average, they can conceal $1000 worth of gold. If Goldie inspects the miners after each shift, it will cost her $100 per miner and there is a 50% chance that she will discover the gold. If the gold is discovered, Goldie will, of course, recover its value and fire the miner. Assume that miners regard being fired (particularly on reality TV) to carry a cost of $2000. Fill in the payoff matrix below.
Please comment on the existence and exact nature of: 7a. Cooperative equilibrium:
7b. Dominant strategy equilibrium
7c. Nash equilibrium in pure strategies
7d. Nash equilibrium in mixed strategies.
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