ECON 100B Study Guide - Final Guide: Utility, Nash Equilibrium, Subgame Perfect Equilibrium
Document Summary
Candidates should answer all questions in the space provided. You may con- tinue on the back of the sheet if you need additional space. This is a closed- book, closed-notes exam, with no calculators. The total number of points for the paper is 50. In a trust game, player 1 is given . She can send any fraction of that money to player 2. Whatever money is sent to player 2 is tripled in the process (e. g. if is sent by player 1, then player 2 receives ). Explain why the equilibrium is pareto ine cient. (3 marks: player 1 again maximizes his monetary payo . But now suppose that player 2 can be either a trustworthy type or untrustworthy type. But trustworthy types always return to player 1 double what player 1 sent. 2 and sends zero if p < 1. Consider a model of pure exchange with two consumers ronald and mikhail and two goods.
