Indicate whether the statement is true or false, and justify your answer.The endowment effect leads to a stronger status quo bias, because trades are more likely to occur.

Consider the following ultimatum game. In Stage 1, the proposer chooses a shares of $1 to offer to the responder. The shares can be any number between 0 and 1 (including 0 and 1). After observing the proposer's decision, the responder may choose to accept or reject. If the responder accepts, the proposer keeps (1 − s) × $1 and the responder receives s × $1. If the responder rejects, both players receive 0. Assume that the responder always accepts when she is indifferent between accepting and rejecting. Suppose that both the proposer (Player P) and the responder (Player R) exhibit inequity aversion as specified in the model of Fehr and Schmidt (1999), with ap = aR = 2 and ẞp = ẞR = 0.6 (ap and ẞp are the parameters for player P; OR and BR are the parameters for player R). Suppose these preferences are commonly known to both players. Use backward induction to solve the subgame perfect Nash equilibrium.

Suppose Justine and Sarah are playing the ultimatum game. Justine is the proposer, has $140 to allocate, and Sarah can accept or reject the offer. Based on repeated experiments of the ultimatum game, what combination of payouts to Justine and Sarah is most likely to occur?.

Education as a signal If c = $15,000 ; WH = $40, 000 and WL = $20, 000. For what value of θ is a pooling equilibrium possible?

Consider an exchange economy with A and B. For the endowment, A has (x,y) = (10,40) and B has (x,y) (20,5). Assume that both A and B have a Cobb Douglas utility function u(x,y) = xy. Say A proposes to give B 5 units of good y. What is the most x B is willing to give to A in return? 2.5 5 10 12.5 Question 2 1 pts Consider the exchange economy in question 1 again. If the price of x is $4 and the price of y is $8, then consumer A has an income of and A's optimal basket has x* = units. 320; 40 320; 45 360; 45 360; 40

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Economic agents for example consumers or firms often do things Economic agents (for example, consumers or firms) often do things that at first glance seem to be inconsistent with their self-interest. People tip at restaurants and when they are on vacation even if they have no intention to return to the same place. Firms, sometimes, install costly pollution abatement equipment voluntarily. How can these deviations from Nash predictions be explained? Economic agents for example consumers or firms often do things

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In an exchange economy, there are two agents, A and B, and there are 560.00 total units of x and 560.00 total units of y. The two consumers have utility functions u(x, y) = x²y and u³ (x, y) = xy, respectively. Assume the initial endowments are wд = (504.00, 56.00) and wB = (56.00, 504.00). Let p be the price of good y, and let the price of good x be 1. The competitive equilibrium value of p is answer to the nearest two decimals if needed.) (Round your

Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade. Students in group A are given food (F) when they walk in, and students in group B are given a drink (D). Refer to Scenario 1. Suppose they have very different preferences where food and drink provide utility. For group A, U = FαDβ. For group B, U = min{F,D}. The contract curve in the Edgeworth box using a representative from each group would be (a) a right angle connecting the lower left corner with the upper right corner.(b) a curve (not necessarily a line) connecting the lower left corner with the upper right corner. (c) a line connecting the lower left corner with the upper right corner.(d) a right angle connecting the upper left corner with the lower right corner.