Three friends i = 1, 2, 3 get together for a few drinks and decide to share the total bill equally. Friend i's preferences are represented by the utility function u₁(x₁, y₁) = 2√x-y₁. where x; is the number of drinks that i consumes and y; is the amount of money that i pays. Each drink costs $1. (a) Describe the strategic game generated by this situation.
Three friends i = 1, 2, 3 get together for a few drinks and decide to share the total bill equally. Friend i's preferences are represented by the utility function u₁(x₁, y₁) = 2√x-y₁. where x; is the number of drinks that i consumes and y; is the amount of money that i pays. Each drink costs $1. (a) Describe the strategic game generated by this situation.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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this is not graded paper, I have made these practice questions myself. Dont reject it.
![Three friends i = 1, 2, 3 get together for a few drinks and decide to share the total bill
equally. Friend i's preferences are represented by the utility function
u¡ (x₁, y₁) = 2√√√x¡ — Yi ·
where x; is the number of drinks that i consumes and y; is the amount of money that i
pays. Each drink costs $1.
(a) Describe the strategic game generated by this situation.
(b) How many drinks will these friends have at the Nash equilibrium of the game
generated by this situation? Is the Nash equilibrium a dominant-strategy
equilibrium? Explain.
(c) Is this Nash equilibrium efficient? Explain.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1afed075-6f81-410d-99f3-065485064536%2F9d74c9ea-3bac-4f5d-9e3b-ff88c66dd016%2F99ynvg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Three friends i = 1, 2, 3 get together for a few drinks and decide to share the total bill
equally. Friend i's preferences are represented by the utility function
u¡ (x₁, y₁) = 2√√√x¡ — Yi ·
where x; is the number of drinks that i consumes and y; is the amount of money that i
pays. Each drink costs $1.
(a) Describe the strategic game generated by this situation.
(b) How many drinks will these friends have at the Nash equilibrium of the game
generated by this situation? Is the Nash equilibrium a dominant-strategy
equilibrium? Explain.
(c) Is this Nash equilibrium efficient? Explain.
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