12.5 Two backpackers have crossed paths and are travelling together for a period. Each has in his possession some slices of ham (H) and cheese (C). Shelly is a choosy eater and will eat ham and cheese only in the fixed proportions of 2 slices of cheese to 1 slice of ham. Her utility function is given by US = min(H, C /2).

Jenny is more flexible in her dietary tastes and has a utility function given by UJ = 4H + 3C. Total endowments are 100 slices of ham and 200 slices of cheese.

a.

Draw the Edgeworth box diagram that represents the possibilities for exchange in this situation.

What is the only exchange ratio that can prevail in any equilibrium?

b.

c.

d.

Suppose Shelly initially had 60H and 80C. What would the equilibrium position be?

Suppose Shelly initially had 40H and 80C. What would the equilibrium position be?

Suppose Shelly (much the stronger of the two)

decides not to play by the rules of the game. Then what could the inal equilibrium position be?