Economics 1st Edition by Dean Karlan,Jonathan Morduch

تمرين 14

Figure 9P-7 shows a sequential game in which one player decides whether to cause damage to the property of (injure) another player. The injured player can then choose whether to sue, which involves costly legal fees.
a. What is the predicted outcome in this "game"?
b. What is the predicted outcome if the injured party has made a binding commitment always to sue when injured?