Tadelis 15.3: page 315, Trust Thy Neighbor: A student, player 1, has to hand in a

problem set at the other end of (a large) campus but needs to rush into an exam. She has

two options. She can deliver the problem set after the exam (call this option L) and incur

a late penalty. Alternatively she can give the problem set to player 2, a random student

who happens to be next to player 1 (call this option S). Player 2 can then either deliver the

1

problem set on time (call this option D) or throw it away in the nearest trash can (call this

option T ). For player 1 the payoff is 1 if the problem set is delivered on time, 1 if it is

thrown away, and 0 if it is delivered late. The payoffs for player 2 are x if he delivers and y

if he throws it away.