1. The technology of interaction for a contractual relationship is given by the matrix below. 2 H L 1 H 5,5 0,8 L 7,0 1,1 Suppose the players write an incomplete contract stating that they agree to play the jointly-efficient outcome (that which maximizes the joint payoff as found in last week's homework). Assume that the court can verify exactly the outcome of produc-
1. The technology of interaction for a contractual relationship is given by the matrix below. 2 H L 1 H 5,5 0,8 L 7,0 1,1 Suppose the players write an incomplete contract stating that they agree to play the jointly-efficient outcome (that which maximizes the joint payoff as found in last week's homework). Assume that the court can verify exactly the outcome of produc-
Chapter8: Game Theory
Section: Chapter Questions
Problem 8.6P
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Question
![1. The technology of interaction for a contractual relationship is given by the matrix
below.
2
H
L
1
H
5,5
0,8
L
7,0
1,1
Suppose the players write an incomplete contract stating that they agree to play
the jointly-efficient outcome (that which maximizes the joint payoff as found in last
week's homework). Assume that the court can verify exactly the outcome of produc-
tion.
(a) Suppose that the court uses expectation damages. Can the jointly-
efficient outcome be implemented? Briefly explain.
(b) Suppose that the court uses reliance damages. Can the jointly-efficient
outcome be implemented? Briefly explain.
(c) Suppose that the court uses restitution. Can the jointly-efficient out-
come be implemented? Briefly explain.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7b9ef3af-1bb5-4398-94ba-7d8c1b3fd143%2Ffd9ffdd7-2d56-4478-b954-7bad99529e73%2F1c7j684_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. The technology of interaction for a contractual relationship is given by the matrix
below.
2
H
L
1
H
5,5
0,8
L
7,0
1,1
Suppose the players write an incomplete contract stating that they agree to play
the jointly-efficient outcome (that which maximizes the joint payoff as found in last
week's homework). Assume that the court can verify exactly the outcome of produc-
tion.
(a) Suppose that the court uses expectation damages. Can the jointly-
efficient outcome be implemented? Briefly explain.
(b) Suppose that the court uses reliance damages. Can the jointly-efficient
outcome be implemented? Briefly explain.
(c) Suppose that the court uses restitution. Can the jointly-efficient out-
come be implemented? Briefly explain.
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