Which of the following statements about the resulting Nash equilibrium are true?

Question

Which of the following statements about the resulting Nash equilibrium are true?

Select one or more:

a. The resulting Nash equilibrium is Pareto inefficient.

b. In equilibrium, the agent earns an enforcement rent.

c. The equilibrium results in durable transactions between the agent and the principal.

d. The resulting Nash equilibrium is Pareto efficient.

Consider the following diagram and complete the statement below Iso-profit: q Best Response 28 Function . qal_ Nash Equilbrium 25 28 40 Price, p The principal would like the orange line to be as choose -as possible and is constrained only by the agent's choose. . He will maximize profits by picking the point at which the orange line is. Choose the agents, Choose.

Explanation / Answer

THE ANSWER ARE AS FOLLOWS:)

i) High

ii) Marginal rate of transformation.

iii) tangent to

iv) best response function.

2) The answer is A, B, C and D.

Alla are true.

Because , the nash equilbruim is also Pareto inefficient, the best example is prisonar dilemma.

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