Find the mixed-strategy equilibrium

Assignment Help Microeconomics
Reference no: EM13952769

A taxpayer has income y that should be reported in full to the tax au- thority. There is a flat (proportional) tax rate r on income. The reporting technology means that that taxpayer must report income in full or zero income. The tax authority can choose whether or not to audit the taxpayer. Each audit costs an amount rp and if the audit uncovers under-reporting then the taxpayer is required to pay the full amount of tax owed plus a fine F .

1. Set the problem out as a game in strategic form where each agent (taxpayer, tax-authority) has two pure strategies.

2. Explain why there is no simultaneous-move equilibrium in pure strategies.

3. Find the mixed-strategy equilibrium. How will the equilibrium respond to changes in the parameters r, rp and F ?

Reference no: EM13952769

Questions Cloud

How the information can be combined to determine trends : What each map shows. How the information can be combined to determine trends. What the trend appears to be for the United States as a whole
What is the equilibrium : An oligopoly contains N identical firms. The cost function is convex in output. Show that if the firms act as Cournot competitors then as N increases the market price will approach the competitive price.
What does kaizen and emptying a dishwasher have in common : Early identification of autism - Early characteristics, onset of symptoms, and diagnostic stability - What Does Kaizen and Emptying a Dishwasher Have in Common?
Explain how the segment margin differs from the cm : Explain how the segment margin differs from the CM. Why aren't common costs allocated to segments under the contribution approach?
Find the mixed-strategy equilibrium : Set the problem out as a game in strategic form where each agent (taxpayer, tax-authority) has two pure strategies. Explain why there is no simultaneous-move equilibrium in pure strategies.
What do you think of the article : Article- Some Early Childhood Experiences Shape Adult Life, But Which Ones? What do you think of the article? Be specific
Would you expect company to have high dividend payout ratio : Armcor Inc. is in a rapidly growing technological industry. Would you expect the company to have a high or low dividend payout ratio?
What is meant by dividend yield on a common share investment : What is meant by the dividend yield on a common share investment? "If a share's market value exceeds its book value, then the share is overpriced." Do you agree? Explain.
Determine degree of inequality aversion of social-welfare : Show that if people did not know which one of the identities {a, b, c} they were to have before they vote, if they regard any one of these three identities as equally likely and if they are concerned to maximise expected utility, then majority vot..

Reviews

Write a Review

 

Microeconomics Questions & Answers

  What is the bond interest rate

Shannon purchases a bond for $1,142.38. The bond matures in 3 years, and she will redeem it at its face value of $1,200. Interest premiums are paid annually. If Shannon will earn a yield of 5%/year compounded yearly, what is the bond interest rate?

  Show the ppf-budget constraint-indifference curve

Show the PPF-Budget Constraint-Indifference curve diagram for H and for F in this free trade equilibrium.

  Define the most prominent benefit offered by many firms

Workers are compensated by firms with "benefits" in addition to wages and salaries. The most prominent benefit offered by many firms is health insurance. Suppose that in 2000 workers at one steel plant were paid $20 per hour

  List three of the highest paying occupations

List three of the highest paying occupations. Why do you think they are high paying jobs? Does a strike for a raise of 5 cents/hour make any sense? What kind of long-term benefit might a union gain from such a strike? If poor people don't want to wor..

  Reflect on the arguments presented

Identify what you determined is the more persuasive argument - Reflect on the arguments presented and reveal your consensus.

  What sorts of developments might discourage

Suppose that you were in business and intended to build a plant to turn out a promising new item-say, a pencil that would last twice as long as the kinds available now. What sorts of developments might discourage you from making this investment..

  Draw the supply and demand diagrams

Suppose US demand for steel is given by P = 200 - Q; US supply for steel is given by P = 50 + Q/2; International firms can supply as much or as little steel as they want at a price of P = 80.(a) Draw the supply and demand diagrams with and without in..

  A increase aggregate demand by cutting government spending

a. increase aggregate demand by cutting government spending or raising taxes.b. decrease aggregate demand by cutting

  Major long term tax cut

The President of US is suggesting increased spending for a missile defense system and also proposing a major long term tax cut. Provide some predictions of possible outcomes for the federal budget categories,

  In heckscherohlin model what generates comparative advantage

In the Heckscher-Ohlin model what generates comparative advantage? Which factor of production will oppose trade in the Heckscher-Ohlin model?

  What is your annual effective interest rate

What is your monthly interest rate and what is your annual effective interest rate? What is the future worth of a series of equal monthly payments of $5,000 if the series extends over a period of six years at 9% interest compounded? Ryan expects to d..

  Describe the structure of the federal reserve system

The question related to Economics and it explain about the Federal Reserve system. The structure of the Federal Reserve system and its independence from the government has been discussed in the answer.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd