Three roommates are trying to renovate their kitchen. They decided to vote onwhether or not it is worth renovating. If at least 2 people vote for the renovation, thenit will happen and everyone would split the costs of renovation equally. Their utilityfunctions are U1= (1+ R)y1; U2 = (2 + R)Y2 and U3if the kitchen is renovated and 0 otherwise, and y;is the amount of money i spends onprivate consumption. Agent 1 has $900; Agent 2 has $2100 and Agent 3 has $1500;renovation project costs $1500 total.(3 + R)y3, where R=11. Will the house be renovated if no bribes are allowed?2. Can they reach an agreement so that the house ends up being renovated?

Every rationale economic agent maximizes tends to maximize his utility , therefore chooses the…

Three roommates are trying to renovate their kitchen. They decided to vote on whether or not it is worth renovating. If at least 2 people vote for the renovation, then it will happen and everyone would split the costs of renovation equally. Their utility functions are U1= (1+ R)y1; U2 = (2 + R)y2 and U3 = (3 + R)y3, where R=1 if the kitchen is renovated and 0 otherwise, and y; is the amount of money i spends on |3| private consumption. Agent 1 has $900; Agent 2 has $2100 and Agent 3 has $1500; renovation project costs $1500 total. 1. Will the house be renovated if no bribes are allowed? 2. Can they reach an agreement so that the house ends up being renovated?

Three roommates are trying to renovate their kitchen. They decided to vote on whether or not it is worth renovating. If at least 2 people vote for the renovation, then it will happen and everyone would split the costs of renovation equally. Their utility functions are U1= (1+ R)y1; U2 = (2 + R)y2 and U3 = (3 + R)y3, where R=1 if the kitchen is renovated and 0 otherwise, and y; is the amount of money i spends on |3| private consumption. Agent 1 has $900; Agent 2 has $2100 and Agent 3 has $1500; renovation project costs $1500 total. 1. Will the house be renovated if no bribes are allowed? 2. Can they reach an agreement so that the house ends up being renovated?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.8P

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