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Please answer the question provided in the image below. Question 4: Suppose Lisa and Maggie have social-welfare preferences as in Question 3. In contrast, Bart
Please answer the question provided in the image below.
Question 4: Suppose Lisa and Maggie have social-welfare preferences as in Question 3. In contrast, Bart has "inequity aversion" of the form introduced by Fehr & Schmidt (that we discussed in class). (a) Consider the following modified dictator game: Player I divides 40 tokens between Player I and Player 2. Each token is worth $3 to Player l, and each token is worth $5 to Player 2. How would Lisa, Maggie, and Bart behave in this game? (b) Consider the following modified dictator game: Player I divides 40 BLUE tokens and 30 RED tokens between Player I and Player 2. Each BLUE token is worth $2 to Player I and $1 to Player 2. Each RED token is worth $2 to Player I and $3 to Player 2. How would Lisa, Maggie, and Bart behave in this game? Note: For each game, you should specify how Lisa and Maggie's behavior depends on their A, and how Bart's behavior depends on his a and [3. Also, if you like, you may assume that Player I
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