An aged mother wishes to give an asset to one of her several sons. She wants to ensure it goes to the son who most values it. But the mother has failed to inculcate honesty in her sons; since each wants the asset, they have an incentive to exaggerate its worth to them. The mother therefore devises the foliowing scheme to reveal the most deserving recipient. She asks the sons to tell her con?dentially how much they value the asset, and promises to give it to the one who reports the higher valuation {in US$ equivalents). To ?nance one last holiday for herself, she will extract a payment from the recipient, equal not to what the recipient reports, but to the second-highest reported valuation.
- Will the mother's scheme make honesty the best policy?
- Develop a business situation where this game may be applicable