Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 9P
(a)
To determine
Movie choice of Paul and Maya from an individual perspective.
(b)
To determine
Factors affecting Maya and Paul when on a date and Paul’s choice if Maya decides to watch a comedy.
(c)
To determine
Maya and Paul’s movie choice, why it is a herding tendency and how it would lead to cascading of information.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Problem 1. Andy (consumer A) and Red (consumer B) growing old together on a remote
island on which only fish (good 1) and coconut (good 2) are available for consumption.
Both Andy and Red have Cobb-Douglas preferences. That is, consumer i has u(xi, z) =
(a)¹/2 (1)¹/2, where x is consumer i' s good j consumption with j = 1, 2. Also, Andy's ini-
tial endowment is w (w, w) (1,3) while Red's initial endowment is w = (wi, wz) =
=
=
=
(3, 1).
(a) Draw the Edgeworth box for this economy. Mark the point indicating the initial
endowment of each consumer.
(b) Draw the contract curve for this economy in an Edgeworth box (a graphical represen-
tation is sufficient). Explain if it is Pareto efficient for Andy and Red to consume their
endowments.
(c) What is the set of allocations that could be the outcome under barter in this economy?
(d) Let the price of fish be p₁ while the price of coconut be normalized to 1 without loss
of generality. For each consumer, solve the utility maximization problem,…
Ashley loves hanging out at the mall (payoff of 100) and hates hockey (payoff of -100). Joe loves hockey (payoff of 100) and hates hanging out at the mall (payoff of - 100). But both Ashley and Joe prefer to go out together (bonus payoff of 100 each in addition to the payoff from the activity they choose). If they go out separately, they get no bonus payoff. Complete the payoff matrix for Ashley and Joe. >>> If the answer is negative, include a minus sign. If the answer is positive, do not include a plus sign.
Sean is arguing with his girlfriend, Yvette. They have been going out for a little more than two years.
YVETTE: I'm leaving you, Sean. Get over it.
SEAN: Are you saying that being single will make you happier than you've been with me? Speaking personally, I think the
utility
we've had in this relationship was much more than you could have had if you'd been single this whole time!
YVETTE: I had taken an economics class and the word "utility" rings a bell. It's not that at all. We've had a fine time. It's that the
utility I would get by continuing our relationship isn't worth it anymore.
SEAN: I've never been dumped by someone citing the law of
before. You're a piece of work, you know that?
Yvette doesn't hear. She has already walked off, leaving Sean feeling like something of a sunk cost.
Chapter 18 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
Knowledge Booster
Similar questions
- Two friends are deciding where to go for dinner. There are three choices, which we label A, B, and C. Max prefers A to B to C. Sally prefers B to A to C. To decide which restaurant to go to, the friends adopt the following procedure: First, Max eliminates one of three choices. Then, Sally decides among the two remaining choices. Thus, Max has three strategies (eliminate A, eliminate B, and eliminate C). For each of those strategies, Sally has two choices (choose among the two remaining). a.Write down the extensive form (game tree) to represent this game. b.If Max acts non-strategically, and makes a decision in the first period to eliminate his least desirable choice, what will the final decision be? c.What is the subgame-perfect equilibrium of the above game? d. Does your answer in b. differ from your answer in c.? Explain why or why not. Only typed Answerarrow_forwardWhen consumers were given the opportunity to select a package of ground beef labeled “75% lean” or a package of ground beef labeled “25% fat,” most consumers chose “75% lean.” Why? What concept from the chapter does this illustrate? The reason is that consumers are swayed by cheap talk. Cheap talk is the concept. The reason is that consumers are much more likely to choose the alternative framed as the positive option. This is called a framing effect. The reason is that consumers infer the value of a product from positive advertising. This is called inference induction. The reason is that consumers respond better to higher numbers. They feel they are getting more because 75 is greater than 25. The concept is the endowment effect.arrow_forwardConsider the following game - one card is dealt to player 1 ( the sender) from a standard deck of playing cards. The card may either be red (heart or diamond) or black (spades or clubs). Player 1 observes her card, but player 2 (the receiver) does not - Player 1 decides to Play (P) or Not Play (N). If player 1 chooses not to play, then the game ends and the player receives -1 and player 2 receives 1. - If player 1 chooses to play, then player 2 observes this decision (but not the card) and chooses to Continue (C) or Quit (Q). If player 2 chooses Q, player 1 earns a payoff of 1 and player 2 a payoff of -1 regardless of player 1's card - If player 2 chooses continue, player 1 reveals her card. If the card is red, player 1 receives a payoff of 3 and player 2 a payoff of -3. If the card is black, player 1 receives a payoff of 2 and player 2 a payoff of -1 a. Draw the extensive form game b. Draw the Bayesian form gamearrow_forward
- 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 - z 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 a 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. r ≤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…arrow_forward6) You have been assigned to create a new TV game show, and you have an interesting idea that you call, “I WANT TO BE A MILLIONAIRE.” The basics are: 1) two contestants; 2) the show begins with each contestant being given $1 million (!), and then 3) they begin playing a game that can increase or decrease that $1 million. You worry that the initial outlay of $2 million will stun your producers, so you decide to prepare them with a simpler version of your game that you call: “I WANT $3.” There are four steps in this simpler game: I. There are two contestants/opponents (who do not know each other and cannot communicate with each other during the game). II. Each player is given $3 at the start of the game. III. Independently and simultaneously, each player must choose whether they want to add $0, $1, $2 or $3 to their initial stake of $3. Doing so reduces their opponent’s award by $0, $2, $4, or $6, respectively. IV. Each player knows that their payoff at the end of the game is based on…arrow_forward6) You have been assigned to create a new TV game show, and you have an interesting idea that you call, “I WANT TO BE A MILLIONAIRE.” The basics are: 1) two contestants; 2) the show begins with each contestant being given $1 million (!), and then 3) they begin playing a game that can increase or decrease that $1 million. You worry that the initial outlay of $2 million will stun your producers, so you decide to prepare them with a simpler version of your game that you call: “I WANT $3.” There are four steps in this simpler game: I. There are two contestants/opponents (who do not know each other and cannot communicate with each other during the game). II. Each player is given $3 at the start of the game. III. Independently and simultaneously, each player must choose whether they want to add $0, $1, $2 or $3 to their initial stake of $3. Doing so reduces their opponent’s award by $0, $2, $4, or $6, respectively. IV. Each player knows that their payoff at the end of the game is based on…arrow_forward
- Imagine that you are at dinner with an acquaintance and that you are each independently choosing what to order for dinner: a burger (which costs $8), or a chicken ($12). In terms of enjoyment, you each have the same preferences: you value the burger at $14, chicken at $17. In other words, if you were dining alone and ordered a burger, your payoff would equal $14- $8 = $6. In this case, however, you will split the bill equally with your companion and thus your payoff depends both on your own order and the order of your acquaintance. Specifically, each diner's payoff is equal to the value of their own meal minus half the cost of the total bill. They also get a payoff of $2 when both of them choose the same meal. (a) Write down the normal form representation of the game in which both players are independently choosing between the actions Burger, Chicken. (b) What are pure and mixed Nash equilibria? Draw best response graphs according to beliefs.arrow_forwardTwo players play the Ultimatum Game, in which they are to split $20. A purely rational agent would only reject an offer of …arrow_forwardCase No. 1 Emma likes to call her friend regularly during the month, but he lives abroad. A call costs him $5/minute. The psychological benefit (measured in dollars) of the first 100 minutes of call is $10/minute, that of the next 100 minutes, $5/minute, that of the next 100 minutes, $2.5/minute and finally, that of the next 100 minutes, also $2.5/minute. A) If Emma calls her friend 100 minutes a month, does she make a net gain? B) What is the number of call minutes per month that maximizes Emma's satisfaction? C) If we use Emma's monetary measure of satisfaction, what is the amount of her satisfaction? D) What should be the price per minute of a call for Emma to be at the maximum satisfaction by choosing to call 400 minutes per month?arrow_forward
- Two players play the Ultimatum Game, in which they are to split $20. A purely rational agent would only reject an offer of … Group of answer choices... -$20 -$19 -$1 -$0 -$10arrow_forward8. Suppose that you have a big test on Monday and you plan to spend the weekend studying. On Saturday, your friend invites you to spend the day at a water park. It's the last weekend that the park will be open for the year. You'd really like to go to the park, but you're worried that you won't have enough time to study on Sunday. What are the possible tradeoffs of each choice-going to the water park or staying home to study?arrow_forwardPlease explain why other options are incorrectarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning