An island has 2 reefs that are suitable for fishing and 20 fishermen. Each fisherman can...

An island has 2 reefs that are suitable for fishing and 20 fishermen. Each fisherman can fish on only one reef. The current institution is that a fisherman gets to keep the average number of fish caught from the reef on which he chose to fish. On reef 1 the total number of fish caught is given by F1(R1) = 12R1 − (R1)2/2, where R1 is the number of fishermen on reef 1. For reef 2 the relationship is F2(R2) = 5R2, where R2 is the number of fishermen on reef 2.

Part A: Under this institution, what is the total number of fish caught?

Part B: The chief of the island asks his economist whether this arrangement is efficient (that is, whether the equilibrium allocation of fishermen to reef maximizes the number of fish caught). What is the answer to the chief’s question? Explain. How would you determine the efficient number of fishermen on each reef?

Expert Solution

Rahul Sunny answered 2 years ago

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