Amir and Beatrice play the following game. Amir offers an amount of money z € [0, 1] to Beatrice. Beatrice can either accept or reject. If Beatrice accepts, then Amir receives 1 - x dollars and Beatrice receives a dollars. If Beatrice rejects, then both receive no money. As in the Ultimatum Game, Amir cares only about maximizing the amount of money he receives. Beatrice, on the other hand, detests Amir, and therefore cares about the amount of money that both receive: if Amir receives y dollars and Beatrice receives z dollars, then Beatrice's payoff is a-ay where a > 0. (a) Find all pure strategy Nash equilibria of the game in which the two players choose simultaneously (thus Beatrice accepts or rejects without seeing Amir's offer). Solution: The NE are the strategy profiles in which Beatrice rejects and Amir's offer a satisfies 2-a(1-x) ≤0, i.e. x ≤a/(1+a). (b) Find all subgame perfect equilibria of the sequential game in which Amir first makes the offer and Beatrice observes the offer before choosing whether to accept or reject. Solution: There is a unique SPE given by Amir offering r* = a/(1+a), and Beatrice accepting any offer r≥a/(1+a) and rejecting any lower offer.

Write a sentence or two defining the following terms in your own words. Give examples of each.     j. Dishonest workers               k. Elastic Demand               l. Entrepreneurship

Answer this question

The opportunity cost of working is __ Select one: a. the wage you earn for the time spent working. b. too high to even consider not working. c. what you can buy because you worked. d. what you would have done during the time if you were not working.

Question 3 A certain household comprises of a couple, Adam (A) and Betty (B). They have lexicographic preferences over two goods G1 and G2 - A wants to consume as much of G1 as possible, before moving on to G2 whereas, for B, it is the opposite, she wants to consume as much of G2 as possible before moving on to G1.¹ Given their varying preferences, they decide to shop separately, after dividing the household income equally. The household income is $8. One difference to the usual setting - there are government restrictions in place so that no individual is allowed to buy more than two units of either good. Hint: Do not use mathematical brute force (like Calculus) to solve this problem. A simple diagram with appropriate budget lines, etc. should suffice. 1) Suppose prices are p= (P₁, P2) = (1,2). Denote the optimal choice of A and B as a= b= (b₁,b₂) respectively. Solve for a and b. (a1, a2) and

What are the environment in which business operates?