Balthazar and Artemis are cousins who grow stick cactus in adjacent plots. Each can choose to work somewhat hard and expend $200 worth of effort, or can work extremely hard and expend $300 worth of effort

If either works somewhat hard, he can produce stick cactus that sell for a total of $650. If either works extremely hard, he can produce stick cactus which sell for a total of $800. Both Balthazar and Artemis are equally good at growing stick cactus. a. What is the dominant strategy for Balthazar and for Artemis? b. If both play their dominant strategies, what is the net payoff for each cousin? c. Is there a Nash equilibrium, and if so, what is it? Now assume the cousins are forced by government to combine their plots and share what they make. d. What is the dominant strategy for Balthazar and for Artemis? e. If both play their dominant strategies, what is the net payoff for each cousin? f. Is there a Nash equilibrium, and if so, what is it? g. How did this change in property rights affect each cousin's incentive to work, and what happens to the economic pie?


a. The dominant strategy for both cousins is to work extremely hard.
b. Each cousin has a net payoff of ($800 - $300 ) = $500.
c. The Nash equilibrium occurs when each cousin works extremely hard.
d. The dominant strategy for both cousins is to work somewhat hard.
e. Each cousin has a net payoff of ($650 - $200 ) = $450.
f. The Nash equilibrium occurs when each cousin works somewhat hard.
g. Each cousin has less incentive to work extremely hard and the economic pie shrinks.

Economics

You might also like to view...

Supply curves

A) slope upward. B) slope downward. C) are horizontal. D) can have many shapes.

Economics

The Lorenz curve shows

A) how poverty rates change over time. B) the percentage of population below the poverty line. C) the degree of inequality in the income distribution. D) the ratio of cash income to payments-in-kind.

Economics

According to most economists, the development of markets is:

A. both a necessary and a sufficient condition for development. B. a sufficient condition for development but not a necessary condition. C. a necessary condition for development but not a sufficient condition. D. neither a necessary nor a sufficient condition for development.

Economics

If a $1 million open market purchase by the Fed generates a new deposit at a bank that immediately causes the bank's reserves held at the Fed to increase by $1 million, then the T-account effects are that the bank's assets and liabilities ________ by $1 million and that the Fed's assets and liabilities ________ by $1 million.

A. increase; increase B. increase; decline C. decline; decline D. decline; increase

Economics