Question: Question [7]: [12 marks] Consider a a two state model. Suppose that there are two consumers, A and B, with endowments of wA = (4,6)

Question [7]: [12 marks] Consider a a two state model. Suppose that there are two consumers, A and B, with endowments of wA = (4,6) and wB = (6, 8). Let the objective probability of state 1 occuring be 7. Suppose that both consumers are expected utility maximizers and strictly risk averse and that they have identical preferences Tu(CI) + (1 - 7) u(C2) with u'(.) > 0, and u"(.)

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