Question

In: Economics

Find nash equilibrium for t and y utitily functions for rich (r) and poor (p) y...

Find nash equilibrium for t and y

utitily functions for rich (r) and poor (p)

y is income and t is tax.

ur = y(1 − t) − 0.5y 2

up(t, y) = ty

Solutions

Expert Solution

We have the utility function of rich and poor as follows:

The utility function of rich is

The utility of poor is

Here, the two players are rich (r) and poor (p), where t = tax and y = income.

Considering the utility function of rich,

if 'r' chooses (t) then we have to differentiate the utility function of rich with respect to (t), hence we get the following

if 'r' chooses (y) then we have to differentiate the utility function of rich with respect to (y), hence we get the following

The Nash Equilibria occurs at the best response of (t) and (y) at (t*,y*), hence we have the Nash equilibrium of rich as follows

Considering the utility function of poor,

if 'r' chooses (t) then we have to differentiate the utility function of poor with respect to (t), hence we get the following

if 'r' chooses (y) then we have to differentiate the utility function of rich with respect to (y), hence we get the following

The Nash Equilibria occurs at the best response of (t) and (y) at (,), hence we have the Nash equilibrium of poor as follows

Conclusion:

The Nash Equilibrium of rich

The Nash Equilibrium of poor


Related Solutions

Let p, q, g : R → R be continuous functions. Let L[y] := y'' +...
Let p, q, g : R → R be continuous functions. Let L[y] := y'' + py' + qy. (i) Explain what it means for a pair of functions y1 and y2 to be a fundamental solution set for the equation L[y] = 0. (ii) State a theorem detailing the general solution of the differential equation L[y] = g(t) in terms of solutions to this, and a related, equation.
y1(t) = (1+t)2 is a solution to y'' + p(t)y' + q(t)y = 0. Find a...
y1(t) = (1+t)2 is a solution to y'' + p(t)y' + q(t)y = 0. Find a second solution that is linearly indepentent of y1(t).
Let   y(t) = (1 + t)^2 solution of the differential equation y´´ (t) + p (t) y´...
Let   y(t) = (1 + t)^2 solution of the differential equation y´´ (t) + p (t) y´ (t) + q (t) y (t) = 0 (*) If the Wronskian of two solutions of (*) equals three. (a) ffind p(t) and q(t) (b) Solve y´´ (t) + p (t) y´ (t) + q (t) y (t) = 1 + t
Given the function u(p,q,r)=((p-q)/(q-r)), with p=x+y+z,q=x-y+z, and r=x+y-z, find the partial derivatives au/ax=, au/ay=, au/az=
Given the function u(p,q,r)=((p-q)/(q-r)), with p=x+y+z,q=x-y+z, and r=x+y-z, find the partial derivatives au/ax=, au/ay=, au/az=
Consider the homogeneous second order equation y′′+p(x)y′+q(x)y=0. Using the Wronskian, find functions p(x) and q(x) such...
Consider the homogeneous second order equation y′′+p(x)y′+q(x)y=0. Using the Wronskian, find functions p(x) and q(x) such that the differential equation has solutions sinx and 1+cosx. Finally, find a homogeneous third order differential equation with constant coefficients where sinx and 1+cosx are solutions.
A vector y  =  [R(t)  F(t)]T describes the populations of some rabbits R(t) and foxes F(t). The...
A vector y  =  [R(t)  F(t)]T describes the populations of some rabbits R(t) and foxes F(t). The populations obey the system of differential equations given by y′  =  Ay where A  =  [−2 15] [−2 9 ] The rabbit population begins at 6000. If we want the rabbit population to grow as a simple exponential of the form R(t)  =  R0e3t  with no other terms, how many foxes are needed at time t  =  0? (Note that the eigenvalues of A...
A vector y  =  [R(t)  F(t)]T describes the populations of some rabbits R(t) and foxes F(t). The...
A vector y  =  [R(t)  F(t)]T describes the populations of some rabbits R(t) and foxes F(t). The populations obey the system of differential equations given by y′  =  Ay where A  =  146 −1656 12 −136 The rabbit population begins at 84000. If we want the rabbit population to grow as a simple exponential of the form R(t)  =  R0e8t  with no other terms, how many foxes are needed at time t  =  0? (Note that the eigenvalues of A are...
Find the periodic payment R required to amortize a loan of P dollars over t years...
Find the periodic payment R required to amortize a loan of P dollars over t years with interest charged at the rate of r%/year compounded m times a year. (Round your answer to the nearest cent.) a. P = 50,000, r = 4, t = 15, m = 4 b. P = 90,000, r = 3.5, t = 17, m = 12' c. P = 120,000, r = 5.5, t = 29, m = 4
Given the following economy: Y = C(Y - T) + I(r) + G C(Y - T)...
Given the following economy: Y = C(Y - T) + I(r) + G C(Y - T) = a + b(Y - T) I(r) = c - dr M/P = L(r,Y) L(r,Y) = eY - fr i. Solve for Y as a function of r, the exogenous variables G and T, and the model's parameters a, b, c, and d. ii. Solve for r as a function of Y, M, P, and the parameters e and f. iii. Derive the aggregate...
Suppose S = {p, q, r, s, t, u} and A = {p, q, s, t}...
Suppose S = {p, q, r, s, t, u} and A = {p, q, s, t} and B = {r, s, t, u} are events. x p q r s t u p(x) 0.15 0.25 0.2 0.15 0.1 (a) Determine what must be p(s). (b) Find p(A), p(B) and p(A∩B). (c) Determine whether A and B are independent. Explain. (d) Arer A and B mutually exclusive? Explain. (e) Does this table represent a probability istribution of any random variable? Explain.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT