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I'd like help with this game theory question. 1. Court Imposed Breach Remedies. Below is a depiction of the underlying game between two fums. (1.A)

I'd like help with this game theory question.

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1. Court Imposed Breach Remedies. Below is a depiction of the underlying game between two fums. (1.A) Firm B Invest (1) Not Invest (N) Firm A ZI, Z Y1, X1 Invest (1) (6, 6) (-15, 40) X1, Yz (33, Not Invest (N) -10) (0, 0) In addition, suppose that the players contract in a setting of court-imposed breach remedies. The players can therefore write a formal (incomplete) contract specifying the strategy profile they intend to play, the court then observes their behavior in the underlying game and if one of them cheated, imposes a breach transfer. (1.A i) What is the Nash equilibrium of the underlying game in terms of strategies and payoffs? (2 points) (1.A 11) Write out the resulting payoffs associated with the induced game under the assumption that the court imposes restitution damages. Can a contract specifying (I, I) be enforced as a NE? Explain. Firm B Invest (I) Not Invest (N) Firm A Invest (1) Not Invest (N) (1.A iii) Write out the resulting payoffs associated with the induced game under the assumption that the court imposes expectation damages. Can a contract specifying (I, I) be enforced as a NE? Why or why not? Explain. Firm B Invest (I) Not Invest (N) Firm A Invest (I) Not Invest (N) Focus(1.B) Let the new underlying game be given by the following strategic form representation: Firm B Invest (1) Not Invest (N) Firm A Z1, Zz Y1, Xz Invest (1) (20, 23) (-16, 32) X1, Yz (24, Not Invest (N) -14) (0, 0) (1.B.i) Write out the resulting payoffs associated with the induced game under the assumption that the court imposes expectation damages. Can a contract specifying (1, I) be enforced? Why or why not? Explain. (5 points) Firm B Invest (1) Not Invest (N) Firm A Invest (1) Not Invest (N) (1.B.ii) Write out the payoffs associated with the induced game under the assumption that the court imposes reliance damages. Can a contract specifying (I, I) be enforced? (4 points) Firm B Invest (1) Not Invest (N) Firm A Invest (1) Not Invest (N) Focus(1.B.iii) Write out the payoffs associated with the induced game under the assumption that the court imposes restitution damages. Can a contract specifying (1, D) be enforced? (4 points) Firm B Invest (1) Not Invest (N) Firm A Invest (I) Not Invest (N) (1.Biv) Given your answers to (1 A ii) and (1.B.iii), explain why the concept of the court-appointed remedy, restitution damages, is particularly effective. Why might the remedy be undesirable from an efficiency point of view? Does restitution damages always promote social welfare? (3 points)

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