Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer this question fast. 5. (5 points) The next three questions form a package. Mario (M) and Tessa (T) have recently met via Tinder.

please answer this question fast.

image text in transcribed
5. (5 points) The next three questions form a package. Mario (M) and Tessa (T) have recently met via Tinder. On their first date, they decide to go together for dinner to an elegant restaurant in Amsterdam. Their utility functions are: UM(9M, TM) = 0.71n[gm] + 0.3 In[100 - rM] Ur(qr, TT) = 0.3 In[gr] + 0.7 In[100 - ry], where "In" denotes the natural logarithm, q; the price of the food ordered by individual i and r, the amount paid by individual i, i = M, T. Note that utilities are increasing in the price of what they order q; and decreasing in what they pay ri. Assume that Mario and Tessa, prior to simultaneously ordering their meals, decide and commit to jointly pay the bill. That is, if the orders are {qM, qr}, each pays an amount r = it ;= M,T. 2 Derive the Nash equilibrium of the dinner game. In particular, derive the price of the orders they will place. A. {9M = 70.59, qr = 164.71} B. {qM = 124.05, qr = 22.78} C. {qM = 189.47, qr = 84.21} D. {qM = 22.78, qr = 124.05} 6. (5 points) Suppose that they initially decide to pay their bills separately. Derive the optimal orders of Mario and Tessa, and the corresponding utilities. A. {qM = 70, qr = 30} B. {qM = 110, qr = 70} C. {qM = 100, qr = 60} D. {qM = 60, qr = 100} 7. (2 points) In view of your results above, is it a good idea for Mario and Tessa to commit to jointly pay the bill and then simultaneously order their meals? A. For Mario not, for Tessa yes. B. For both of them. C. For none of them. D. For Tessa not, for Mario yes

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

International Economics Theory and Policy

Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz

9th Edition

978-0132146654, 0132146657, 9780273754091, 978-0273754206

More Books

Students also viewed these Economics questions