Question
Question 1 was :Two countries, A and B, have a conflict over a common border. The border can take values from zero to one, inclusive,
Question 1 was :"Two countries, A and B, have a conflict over a common border. The border can take values from zero to one, inclusive, where x is the percentage of the disputed territory under Country A's control. The status quo border is normalized to one, which is Country A's ideal point. Country B's ideal point for the border is 0. Country A's utility function is r and Country B's utility function is 1-x and, where r is the point at which the border is actually set. If the two countries go to war over the border dispute, the winner will set the border at its ideal point. Assume that the costs of war are 0.15 for each country. Suppose country A has a probability of winning the war of 0.50."
4. Returning to the scenario and parameters in question 1, but now assume each country has private information. A thinks its probability of winning the war is 0.75. But B also thinks its probability of winning the war is 0.80. (Obviously, at least one of them is wrong). The costs of war are 0.15. a) What is the range of bargains that A would accept to avoid war? b) What is the range of bargains that B would accept to avoid war? c) Will A and B be able to reach a negotiated settlement? Why or why notStep by Step Solution
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