Q1 Three law partners jointly own a firm share equally in its revenues.Each law partner individually decides how much effort to put into the firm . The revenue of the firm is given by 4(S1+S2+bs1s2) where S1 and S2 are I efforts of the lawyers 1 and 2 respectively. The parameter b=0 reflects the synergies between their efforts, the more one lawyer works the productive is the other. Assume that each effort level lies in the interval si=0,4.

1. Show that the only rationale strategies are never beat response.

2. Is s*a Nash equilibrium

3. If the partners agree to work the same amount as each other and they provide contract specifying that amount, what common amount of effort should they agree?

Q2 Consider three choices,xyz ,choice X gives 20 with probability 1/2 and 10 with probability 1/4.=Choice y gives 30 without certainity.

a) Determine if risk averse individual prefers X over Y

b) Provide information needed to compare the two individuals attitude.