(Answered) Edgeworth-boxassume now that a and b interact in exchange

Economics

Edgeworth-Box

Assume now that A and B interact in exchange without a social planner, but that one has first-mover advantage. A 0 s utility function is u A[x A, y B] = x 0.5y 0.5 and B has the utility function u B[x B, y B] = x 0.5y 0.5 .

a. What is the TIOLI allocation when A has TIOLI power?

b. Prove that it is Pareto efficient

c. What is the TIOLI allocation when B has TIOLI power?

d. Prove that it is Pareto efficient.

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