2 Players A and B are bargaining over splitting a dollar. Their utility functionsareUA = xA", where a ɛ (0, 1], and UB = XB ;XA and Xg are their shares of the dollar. If they do not agree, they both get zero.i) Find the feasible set of utilities, 2, and draw a picture of it when a = 1, and a = ½.ii) Find the Nash bargaining solution in 2 in both cases. How does the value of a affect theoutcome?

Nash equilibrium represents a situation in a strategic interaction or game where no player has an…

Answered: Players A and B are bargaining over…

Players A and B are bargaining over splitting a dollar. Their utility functions UA=XA", where a & (0, 1], and UB=XB; e their shares of the dollar. If they do not agroo

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Players A and B are bargaining over splitting a dollar. Their utility functions
are
UA = xA", where a ɛ (0, 1], and UB = XB ;
XA and Xg are their shares of the dollar. If they do not agree, they both get zero.
i) Find the feasible set of utilities, 2, and draw a picture of it when a = 1, and a = ½.
ii) Find the Nash bargaining solution in 2 in both cases. How does the value of a affect the
outcome?

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