p(ygi) =0.1, for i = 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and g = f, m. That is, yg can be any discrete value between 0 and 10, and all these values have an equal chance of being drawn (with probability of 0.1). Marriage markets exist for two periods. All individuals discount the future using 3 = 0.8. In each period, all unmarried men meet an unmarried woman, then they both decides whether or not to marry each other. For an unmarried m with income ym, their likelihood of meeting a type yƒ female is independent of ym, and vice versa (aka all types random meet one another). Assume that any individuals who marry in period 1 are replaced by individuals with the same income before the beginning of the marriage market in period 2. If individuals marry in period 1, they cannot break up and remarry in period 2. Assume that the utility of an unmarried gender g individual is u (yg) = Yg, g = f, m. Assume that the utility of each individual in a married household with incomes (yf, Ym) is given by u (yf, Ym) =YfYm (a) Which values of Ym and Yf result in marriage in period 1 ? In period 2 ? (b) What is the marriage rate in period 1? In period 2? (c) What are the average household incomes of married households in period 1? In period 2?

p(ygi) =0.1, for i = 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and g = f, m. That is, yg can be any discrete value between 0 and 10, and all these values have an equal chance of being drawn (with probability of 0.1). Marriage markets exist for two periods. All individuals discount the future using 3 = 0.8. In each period, all unmarried men meet an unmarried woman, then they both decides whether or not to marry each other. For an unmarried m with income ym, their likelihood of meeting a type yƒ female is independent of ym, and vice versa (aka all types random meet one another). Assume that any individuals who marry in period 1 are replaced by individuals with the same income before the beginning of the marriage market in period 2. If individuals marry in period 1, they cannot break up and remarry in period 2. Assume that the utility of an unmarried gender g individual is u (yg) = Yg, g = f, m. Assume that the utility of each individual in a married household with incomes (yf, Ym) is given by u (yf, Ym) =YfYm (a) Which values of Ym and Yf result in marriage in period 1 ? In period 2 ? (b) What is the marriage rate in period 1? In period 2? (c) What are the average household incomes of married households in period 1? In period 2?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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