Explain why this situation could be considered a principal-agent problem.Draw the extensive form of this principal-agent problem and use backward induction to solve for the Nash Equilibrium.
In two-car automobile accidents, passengers in the larger vehicle are significantly more likely to survive than are passengers in the smaller vehicle. In fact, death probabilities are decreasing in the size of the vehicle you are driving, and death probabilities are increasing in the size of the vehicle you collide with. Some politicians and lobbyists […]