Question

Abdul’s utility function is given by
UA = MA2/MB

Where MA is Abdul’s wealth level and MB is Benjamin’s wealth level. Benjamin’s utility function is given by
UB = MB2/MA

Suppose MA = MB = 10 initially, and suppose there is a joint project that Abdul and Benjamin can undertake that will generate an additional 10 units of wealth to divide between them. The project is neither pleasant nor unpleasant. What is the minimum payment Abdul must be given to secure his agreement to perform the project? What is the minimum payment Benjamin must be given? Will they perform the project?



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  • CreatedDecember 12, 2014
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