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Three friends i = 1, 2, 3 get together for a few drinks and decide to share the total bill equally. Friend E's preferences are
Three friends i = 1, 2, 3 get together for a few drinks and decide to share the total bill equally. Friend E's preferences are represented by the utility function morph) = 2 x/Fiyi- where x!- is the number of drinks that t' consumes and 3),; is the amount of money that i pays. Each drink costs $1. (a) Describe the strategic game generated by this situation. (b) How many drinks will these friends have at the Nash equilibrium of the game generated by this situation? Is the Nash equilibrium a dominant-strategy equilibrium? Explain. (c) Is this Nash equilibrium efficient? Explain
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