Consider a contractual setting in which two players have agreed to invest (play

Question

Consider a contractual setting in which two players have agreed to invest (play I) in a cooperative enterprise. However, since their agreement, but before they have made the investments, some costs and revenues have changed. The current technology of the relationship is the following:

I N

I 3, 2 -5, 6

N 8, -2 0, 0

a) (1 points) Circle the Pareto efficient outcome. b) (3 points) Write the matrix representing the induced game if the court imposes expectation damages. Circle the induced (pure strategy) Nash equilibria. c) (3 points) Write the matrix representing the induced game if the court imposes reliance damages. Circle the induced (pure strategy) Nash equilibria.. d) (3 points) Write the matrix representing the induced game if the court imposes restitution damages. Circle the induced (pure strategy) Nash equilibria.

Explanation / Answer

A) The pareto efficient outcome maximizes the sum of both players' payoffs. Therefore, (l,l) is pareto efficient.

B)

C)

D)

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