Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Need help on all of them please Assume that there are three individuals and k = 1/3. Assume further that return on longterm investment (per

Need help on all of them please

image text in transcribed
Assume that there are three individuals and k = 1/3. Assume further that return on longterm investment (per unit invested in period 0) is L = 0.8 if liquidated in period 1 and R = 2 in period 2. By pooling resources from the three individuals, in period 0 a bank can leave 1.2 units in storage and invest 1.8 units. The 1.2 units in storage can raise enough funds in period 1 to meet withdraw demand by the type1 individual. The 1.8 units invested will generate 1.8 X 2 = 3.6 units in period 2, which can be distributed between the type2 individuals with each receiving 1.80. Suppose the bank offers a deposit to the individuals that pays (1 = 1.20 if withdrawing in period 1 and r = 1.8 if withdrawing in period 2. If one or both type2 individuals also withdraw in period 1, the bank will try to get additional funds by liquidating investments and divide total funds (from both storage and liquidation of investments) equally among all withdrawing individuals. a) (5pt) In period 17 each of the type2 individuals can either wait (don't withdraw in period 1) or run (withdraw in period 1). Determine the payoff matrix facing type2 individuals in period 1. b) (3pt) Find the Nash equilibria for this game

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Rise And Fall Of Neoliberal Capitalism

Authors: David M Kotz

1st Edition

0674725654, 9780674725652

More Books

Students also viewed these Economics questions

Question

Sketch and label the hierarchy of needs.

Answered: 1 week ago

Question

OUTCOME 3 Outline the methods by which firms recruit externally.

Answered: 1 week ago

Question

OUTCOME 2 Outline the methods by which firms recruit internally.

Answered: 1 week ago