1. Homepage
2. Exam
3. ECON 601 - Microeconomics: Theory and Applications - Final Exam - Question 3: Social Preferences

# ECON 601 - Microeconomics: Theory and Applications - Final Exam - Question 3: Social Preferences

This question has been solved

Economics 601 -Microeconomics: Theory and Applications

Final Exam

Please answer all questions below. Answers are due as a single document (pdf preferred) on Canvas. Feel free to scan / take photos of hand-drawn answers for math, figures, or diagrams, just make sure to embed them in your answers. Email me if you have any clarifying or similar questions, and good luck!

3.     Social Preferences (20 points) A major theme of this class has been how social preferences influence behavior. Consider two students working on a joint project who care about both their own outcomes as well as the outcomes of students that they work with, such that for each individual i receiving payoffs πi while working with individual j receiving payoff πj :

Ui =πi +βπj

where:

β=(ai +λi aj)/(1+λi)
is the extent they care about the other student, a
i ∈ [-1,1] is student i’s feelings of altruism or spite

towards student j (and vice versa), and λi 0 is student i’s preference for reciprocity.

3.1.  Imagine a project where each contributor can expend continuous effort ei [0,1] with payoff

equal to the sum of all effort contributed divided by the number of participants (i.e., the average effort), and subjective cost of effort c(ei) = 3⁄4 e. If a single individual were choosing the amount of effort to contribute to such a project, how much effort would they put in? Explain.

3.2.  Now imagine that the same project involves two students, such that the output of ei + ej is split equally between the two of them. The students are reasonably reciprocal, with λ = 1⁄2 , and reasonably altruistic, with a = 1⁄2 for each student, but that information is private, so each student i believes student j’s altruism aj corresponds to the effort ej they expect the other player to contribute to the project. Show that differing initial expectations of aj produce three distinct Nash Equilibria, indicate which ones are stable, and explain why a general norm of cooperating on student projects leads to a pareto-superior outcome.

## Get Solution for This Question

#### Scan above qrcode with Wechat

US代写,University of San Francisco代写,Economics代写,ECON 601代写,Microeconomics代写,Theory and Applications代写,Social Preferences代写,US代编,University of San Francisco代编,Economics代编,ECON 601代编,Microeconomics代编,Theory and Applications代编,Social Preferences代编,US代考,University of San Francisco代考,Economics代考,ECON 601代考,Microeconomics代考,Theory and Applications代考,Social Preferences代考,UShelp,University of San Franciscohelp,Economicshelp,ECON 601help,Microeconomicshelp,Theory and Applicationshelp,Social Preferenceshelp,US作业代写,University of San Francisco作业代写,Economics作业代写,ECON 601作业代写,Microeconomics作业代写,Theory and Applications作业代写,Social Preferences作业代写,US编程代写,University of San Francisco编程代写,Economics编程代写,ECON 601编程代写,Microeconomics编程代写,Theory and Applications编程代写,Social Preferences编程代写,USprogramming help,University of San Franciscoprogramming help,Economicsprogramming help,ECON 601programming help,Microeconomicsprogramming help,Theory and Applicationsprogramming help,Social Preferencesprogramming help,USassignment help,University of San Franciscoassignment help,Economicsassignment help,ECON 601assignment help,Microeconomicsassignment help,Theory and Applicationsassignment help,Social Preferencesassignment help,USsolution,University of San Franciscosolution,Economicssolution,ECON 601solution,Microeconomicssolution,Theory and Applicationssolution,Social Preferencessolution,