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Please help with (1.A.iii) 1. Court Imposed Breach Remedies. Below is a depiction of the underlying game between two firms. (1.A) Firm B Invest (1)

Please help with (1.A.iii)

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1. Court Imposed Breach Remedies. Below is a depiction of the underlying game between two firms. (1.A) Firm B Invest (1) Not Invest (N) Firm A Z1, Z2 Y1, Xz Invest (1) (6, 6) (-15, 40) X1, Y2 (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.iii) 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 as a NE? Why or why not? Explain. (5 points) Firm B Invest (I) Not Invest (N) Firm A Invest (I) Not Invest (N)

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