P15-5 Auditing GameThe ma

P15-5 Auditing GameThe ma

P15-5 Auditing GameThe manager of a corporate division faces the possibility of an audit every year. She prefers to spend time preparing if she will be audited; otherwise, she would prefer to invest her time elsewhere. The auditor, who gets recognized for uncovering problems, prefers to audit un-prepared clients. If the players match their actions (i.e. the manager prepares and the auditor audits, or the manager doesn?t prepare and the auditor doesn?t audit), the manager wins with a payoff of 20, and the auditor loses with a payoff of ? 20 . If the actions don?t match, the auditor wins with a payoff of 20, and the manager loses with a payoff of ? 20. Diagram this game and comment on the equilibrium.

%d bloggers like this: