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Q1: Ultimatum Game with Types (1 point) Consider an ultimatum game (again). P; offers a share z [0, 1] of a dollar to Ps, so
Q1: Ultimatum Game with Types (1 point) Consider an ultimatum game (again). P; offers a share z [0, 1] of a dollar to Ps, so P can either accept, in which case the dollar is divided as proposed, or reject, in which case both players get $0. Assume P is a standard self-interested rational player, but he is uncertain about Py and fears he might be playing an envious or spiteful type. Suppose specifically that he believes P; is a standard rational player with probability w = 1 p but an envious type with \"envy' parameter & > 0 with probability . That is, if Pj's share 1 z is larger than Py's share , then P incurs an envy cost a(l 2:3) if he accepts. Find the equilibrium of this game as a function of a. What happens if & rises? Explain. Q2: Linear Public Good Game (2 points) Find the general conditions such that punishment can work in a linear public good game in the ERC model and the Fehr-Schmidt model
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