Income Tax Game You are given the following game in which the row player is the auditor and the column player is the tax payer. The auditor has two strategies; whether to audit the tax payer or not audit. The tax payer has two strategies: to be honest in his income or to cheat. The first payoffs belong to the auditor and the second payoffs belong to the tax payer. Tax Payer Honest Cheat 2,0 4,-10 4,0 0,4 Auditor Audit No audit Table 1: Income Tax Game If this is a simultaneous move game; 1. What is the pure strategy NE? 2. What is the mixed strategy NE? 3. Interpret the mixed strategy NE. 4. What could be done if the government would like to increase the proportion of honest tax payers? 5. How people can be incentivized to pay their taxes? 6. Suppose that the penalty for cheating goes from -10 to -20. Show that the proportion of tax payers will not change but the probability of audit will increase. Income Tax Game You are given the following game in which the row player is the auditor and the column player is the tax payer. The auditor has two strategies; whether to audit the tax payer or not audit. The tax payer has two strategies: to be honest in his income or to cheat. The first payoffs belong to the auditor and the second payoffs belong to the tax payer. Tax Payer Honest Cheat 2,0 4,-10 4,0 0,4 Auditor Audit No audit Table 1: Income Tax Game If this is a simultaneous move game; 1. What is the pure strategy NE? 2. What is the mixed strategy NE? 3. Interpret the mixed strategy NE. 4. What could be done if the government would like to increase the proportion of honest tax payers? 5. How people can be incentivized to pay their taxes? 6. Suppose that the penalty for cheating goes from -10 to -20. Show that the proportion of tax payers will not change but the probability of audit will increase