Problem 3 Suppose you and your class mate have to do a group assignment. Both of you can decide to work or shirk. If you both work, then both will get a good mark but both incur the cost of working. If one person works, you get a bad mark but the person who shirked will not have to put in the effort. If both shirk then the students will get an even worse mark but do not have to put in effort. The following table represents the individuals' utilities (as always the first number is the payoff of the row player): you work shirk classmate work 4,4 5,1 shirk 1,5 2,2 e) Suppose both students are inequality averse and lose half a unit of utility for each unit difference in payoffs. In other words u(x, y) = x - - (ay)/2. Show the payoff table with the psychological payoffs. Find all pure-strategy Nash equilibria and discuss.
Problem 3 Suppose you and your class mate have to do a group assignment. Both of you can decide to work or shirk. If you both work, then both will get a good mark but both incur the cost of working. If one person works, you get a bad mark but the person who shirked will not have to put in the effort. If both shirk then the students will get an even worse mark but do not have to put in effort. The following table represents the individuals' utilities (as always the first number is the payoff of the row player): you work shirk classmate work 4,4 5,1 shirk 1,5 2,2 e) Suppose both students are inequality averse and lose half a unit of utility for each unit difference in payoffs. In other words u(x, y) = x - - (ay)/2. Show the payoff table with the psychological payoffs. Find all pure-strategy Nash equilibria and discuss.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter16: Bargaining
Section: Chapter Questions
Problem 8MC
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![Problem 3.
Suppose you and your class mate have to do a group assignment. Both of you can decide
to work or shirk. If you both work, then both will get a good mark but both incur the cost of working.
If one person works, you get a bad mark but the person who shirked will not have to put in the
effort. If both shirk then the students will get an even worse mark but do not have to put in effort.
The following table represents the individuals' utilities (as always the first nimber is the payoff of the
row player):
you
work
shirk
classmate
work
4,4
5,1
shirk
1,5
2,2
e) Suppose both students are inequality averse and lose half a unit of utility for each unit
difference in payoffs. In other words u(x, y) =21 (ay)/2. Show the payoff table with
the psychological payoffs. Find all pure-strategy Nash equilibria and discuss.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9c9e2dde-1c19-44ed-a9d3-170191d095c3%2F10ebf341-40a0-4d79-bcde-09d4d0f38602%2Fkw7p03b_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 3.
Suppose you and your class mate have to do a group assignment. Both of you can decide
to work or shirk. If you both work, then both will get a good mark but both incur the cost of working.
If one person works, you get a bad mark but the person who shirked will not have to put in the
effort. If both shirk then the students will get an even worse mark but do not have to put in effort.
The following table represents the individuals' utilities (as always the first nimber is the payoff of the
row player):
you
work
shirk
classmate
work
4,4
5,1
shirk
1,5
2,2
e) Suppose both students are inequality averse and lose half a unit of utility for each unit
difference in payoffs. In other words u(x, y) =21 (ay)/2. Show the payoff table with
the psychological payoffs. Find all pure-strategy Nash equilibria and discuss.
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