Please construct a table and find the equilibium using NO LIABILITY John can cause an accident, which entails a monetary loss of $1000 to Jane. The likelihood ofthe accident depends on the precaution decisions by both individuals. Specifically, eachindividual can choose either "low" or “high" precaution, with the low precaution requiring nocost and the high precaution requiring the effort cost of $200 to the individual who choosesthe high precaution. The following table describes the probability of an accident for eachcombination of the precaution choices by the two individuals.Jane chooses low precautionJane chooses high precautionJohn chooses low precaution0.80.5John chooses high precaution0.70.1Question:For each of the following tort rules, (i) construct a table describing the individuals' payoffsunder different precaution pairs and (ii) find the equilibrium precaution choices by theindividuals.a) No liability

The term payoff matrix is a table used in game theory that shows the payoff received by the players…

Question: For each of the following tort rules, (i) construct a table describing the individuals' payoffs under different precaution pairs and (ii) find the equilibrium precaution choices by the individuals. a) No liability

Question: For each of the following tort rules, (i) construct a table describing the individuals' payoffs under different precaution pairs and (ii) find the equilibrium precaution choices by the individuals. a) No liability

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Mr. Smith can cause an accident, which entails a monetary loss of $1000 to Ms. Adams. The likelihood of the accident depends on the precaution decisions by both individuals. Specifically, each individual can choose either “low" or "high" precaution, with the low precaution requiring no cost and the high precaution requiring the effort cost of $200 to the individual who chooses the high precaution. The following table describes the probability of an accident for each combination of the precaution choices by the two individuals. Adams chooses high precaution Adams chooses low precaution Smith chooses low precaution 0.8 0.5 Smith chooses high 0.7 0.1 precaution Question: For each of the following tort rules, (i) construct a table describing the individuals’ payoffs under different precaution pairs and (ii) find the equilibrium precaution choices by the individuals. a) No liability b) Strict liability (with full compensation) c) Negligence rule (with efficient legal standard of care) d)…
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