Suppose there are three individuals. Walt has the utility function U (w) = w. Jesse has the utility function U (w) = 2w. Skylar has the utility function U (w) = w². They all have $10,000 to begin. There are two possible punishment regimes the district attorney in Albuquerque, NM could implement. One one regime (Regime 1) they are caught 1/4 of the time, but pay 6,400 when caught. In another (Regime 2), they pay 3,200 but are caught 1/2 of the time. What is the expected punishment of Regime 1?

Suppose there are three individuals. Walt has the utility function U (w) = w. Jesse has the utility function U (w) = 2w. Skylar has the utility function U (w) = w². They all have $10,000 to begin. There are two possible punishment regimes the district attorney in Albuquerque, NM could implement. One one regime (Regime 1) they are caught 1/4 of the time, but pay 6,400 when caught. In another (Regime 2), they pay 3,200 but are caught 1/2 of the time. What is the expected punishment of Regime 1?

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 16.1IP

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