Question
-Sam considers hiring Tim for 5 piano lessons for $100 -Tim's opportunity cost is $75 -Sam's benefits from the class is $150, not the net
-Sam considers hiring Tim for 5 piano lessons for $100 -Tim's opportunity cost is $75 -Sam's benefits from the class is $150, not the net value -Sam can decide to hire or not but if she does not hire Tim, both Sam and Rim end up with $0 payoff. -Tim moves second and can teach or not teach where not-teach entails appropriating the $100 -If Sam does not hire then Tim does not have a decision and both Sam and Tim end up with $0. Show a game tree and solve for equilibrium. If the law allows Sam to sue for not teaching with damages that pays her expected benefit ($150) from lessons. If she sues and wins what will the game tree look like. Describe the economics (incentives and efficiency) between parts A and B of this problem.
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