ECON 704 Midterm: 703 - Micro_II_prelim_Aug_2018_exam Gerorge Mailath
Document Summary
The exam is worth 120 points in total. Start each question in a new book, clearly labeled. Fully justify all answers and show all work (in particular, describing an equilibrium means pro- viding a full description of the strategy pro le and proving that it has the desired properties). If you need to make additional assumptions, state them clearly. Bruce and sheila have to share a pie, which has a cherry on top. To keep notation straight, denote bruce as player 1 and sheila as player 2. Both bruce and sheila would like more of the pie, as well as the cherry, with agent i {1, 2} valuing the cherry at. Assume the cherry has zero width, so that x = 0 is a feasible choice (effectively, one person gets the cherry and the other gets the pie). An allocation is (x , i ) where i {1, 2} is the recipient of the slice with the cherry.
