One way to lower the rate of auto accidents is strict enforcement of motor vehicle laws (speeding, drunk driving, and so on). However, maximum enforcement is very costly. The following payoff table lists the payoffs of a typical motorist and a town government. The motorist can obey or disobey motor vehicle laws, which the town can enforce or not.
Motorist
Obey Don't Obey
Town
|
0, -15
|
0, 0
|
|
-20, -20
|
5, -10
|
|
|
Enforce Don't Enforce
a. What is the town's optimal strategy? What is the typical motorist's behavior in response?
b. What if the town could commit to a strict enforcement policy and motorists believed that this policy would be used? Would the town wish to do so?
c. Now suppose the town could commit to enforcing the law part of the time. (The typical motorist cannot predict exactly when the town's traffic police will be monitoring the roadways.) What is the town's optimal degree (i.e., percentage) of enforcement? Explain.