Reference no: EM131250249
This exercise addresses the notion of goodwill between generations. Consider an "overlapping generations" environment, whereby an infinite-period game is played by successive generations of persons. Specifically, imagine a family comprising an infinite sequence of players, each of whom lives for two periods. At the beginning of period t, player t is born; he is young in period t, he is old in period t + 1, and he dies at the end of period t + 1. Thus, in any given period t, both player t and player t - 1 are alive.
Assume that the game starts in period 1 with an old player 0 and a young player 1. When each player is young, he starts the period with one unit of wealth. An old player begins the period with no wealth. Wealth cannot be saved across periods, but each player t can, while young, give a share of his wealth to the next older player t - 1. Thus, consumption of the old players depends on gifts from the young players. Player t consumes whatever he does not give to player t - 1. Let xt denote the share of wealth that player t gives to player t - 1. Player t's payoff is given by (1 - xt ) + 2xt+1, meaning that players prefer to consume when they are old.
(a) Show that there is a subgame perfect equilibrium in which each player consumes all of his wealth when he is young; that is, xt = 0 for each t.
(b) Show that there is a subgame perfect equilibrium in which the young give all of their wealth to the old. In this equilibrium, how is a player punished if he deviates?
(c) Compare the payoffs of the equilibria in parts (a) and (b).
|
Explain steps that will use to develop risk management plan
: Discuss why risk management is so important to the success of the selected project in a letter to the project sponsor. Describe the steps that will be used to develop the Risk Management Plan.
|
|
Find the temperature increase in the brake assembly
: Write a program to solve Problem 3.123 for a range of initial velocities. Let the car mass and final velocity be input variables.
|
|
Where does that leave the idea that no case is prejudged
: Write a 2-3 page, APA style paper on judicial activism. Present the arguments on both sides of the question as to whether judges should interpret or simply apply the Constitution. Research and provide more current examples (the current Supreme Cou..
|
|
Find the initial and final volumes and total heat transfer
: Track the process described in Problem 3.115 so that you can sketch the amount of heat transfer added and the work given out as a function of the volume.
|
|
Show that there is a subgame perfect equilibrium
: Show that there is a subgame perfect equilibrium in which each player consumes all of his wealth when he is young; that is, xt = 0 for each t.
|
|
What will the total job cost joyce
: She chose a commercial carpet that costs $18.11 per sq. yard. Joyce ordered foam padding at $3.25 per sq. yard. The installers quoted Joyce a labor cost of $4.25 per sq. yard for installation. What will the total job cost Joyce?
|
|
Are you allowed to do any of the aforementioned tasks
: You are dining in a restaurant one night and overhear a conversation where one party is contemplating filing for divorce. The divorce will be uncontested and simple. You explain to them that you are a paralegal and are familiar with the necessary ..
|
|
Calculate the heat transfer in the process
: A cylinder fitted with a frictionless piston contains 2 kg of superheated refrigerant R-134a vapor at 350 kPa, 100?C. The cylinder is now cooled so that the R-134a remains at constant pressure until it reaches a quality of 75%. Calculate the heat ..
|
|
Employees level of job satisfaction
: Why should employers care about their employees' level of job satisfaction? Why are modern employees increasingly unsatisfied with their jobs? What can be done to improve their degree of satisfaction?
|