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
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Chapter1: Making Economics Decisions
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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?
Transcribed Image Text: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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