Question
Consider a similar economy as in Question 1. Now suppose agent C can produce private information about the true realization x at t=1 at the
Consider a similar economy as in Question 1. Now suppose agent C can produce private information about the true realization x at t=1 at the cost =8. Suppose lA=lB=A=B=1. a) Suppose w=50 and x is uniformly distributed between 0 and 100. It means f(x)=1/100. At t=1, what is the maximum amount LB that agent B can borrow with probability 1? What is the haircut for agent B under this strategy? [6 Points] a) Suppose w=70 and x is uniformly distributed between 40 and 100. It means f(x)=1/60. At t=1, what is the maximum amount LB that agent B can borrow with probability 1? What is the haircut for agent B under this strategy? [6 Points]
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