Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
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)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microeconomics

Authors: Paul Krugman, Robin Wells

4th Edition

1464143870, 9781464143878

More Books

Students also viewed these Economics questions