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Question 4 Consider the following case in which two fishermen decide to fish either 8 hours or 6 hours with the following returns. 6 hours
Question 4 Consider the following case in which two fishermen decide to fish either 8 hours or 6 hours with the following returns. 6 hours 8 hours 6 hours 12, 12 6, 15 8 hours 15, 6 9, 9 The fishermen's aim is to decide on whether they fish for 8 hours or 6 hours. Now assume that the utility function of fisherman i interacting with just one other fisherman j is Ui = mi - 6; max(n; - nj,0) - a; max(n; - It;, 0) in which m; and it; are the material returns of i and j. 6; and a; are constants. Consider the cases i) 6; = 0, a; =0 ii) 6; = 0.6, a; = 0 iii) 6; = 0, a; = 0.3 iv) 6; = 0.1, a; = 0.2 a) What does each condition imply about the fishermen's perception of inequality? What determines the utility of fishermen in each condition? b) How does in each given case the Nash equilibrium change compared to the initial condition in which inequality is not considered in the utility function? (15 marks)
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