Economic and Game Theory
|"Inside every small problem is a large problem struggling to get out."|
Thread and Full Text View
I have troubles solving the following problem:
There are a taxpayer and an inspector. The taxpayer receives income y, drawn from some distribution and decides her tax declaration size - d.
The inspector receives taxpayer's declaration and decides whether to audit or not. Doing audit costs - c. If the inspector does audit, she charges taxpayer with penalty - f on the difference between his true income and the declared one.
Could you please provide some advice on how to find NE in this game? [Manage messages]