DSE 2015 answer

[Mike]

Can we discuss question 27 and 28 now?

[maecon]

mike for 27 i might require some hints :(

also buddy i am not sure for 22 :
let me attempt to answer it ,
step 1

for 1: y/Px = x/Py    2: 3y/Px=x/Py  3: y/Px=2x/Px   ( MU/Px = MU/Py )

step 2
now budget constrained equation for each

step 3 solving for x and y for all three cases

i am getting

12 (initial endowment of X ) = 1+ 9/P + 4
14(initial endowment of Y  = P + 3 +  8P

please if u can solve again by this way and tell me

[Mike]

Maecon, asssume that px = p and py = 1
now try to solve it . this time you will get the answer

[maecon]

fine let us discuss 27 and 28

[Mike]

Could you solve question 22? If you still have some doubt then I can post the detailed solution.

[maecon]

thanks mike , i will give one more shot later then surely i will ask you .

it happens , i must be making some mistakes :)

thanks again



just tell me if 21 has b as a correct option .

[Mike]

yes 21 is correct

[Mike]

i dont know how to approach question 27 maecon, help me

[maecon]

ha ha mike i really don't have the right answer but my initial trial was :

for 1 : his U(initial of building of park)  = 30
          his U(if park is build)  = 100 - r2
          his U(if park not build) = 30

again the same for 2

but now i am stuck  

[Amit Goyal]

Its available here: Link

[Mike]

Thank you sir

[maecon]

hey mike please explain to me.:)

like student to student wala, thoda informal rakhna .

[Mike]

Maecon, which question you want me to explain.

[maecon]

27 , sorry i should have written it.

[Mike]

Hey maecon, my solution might look complex at first but read it carefully. If you have any doubts ,feel free to ask. After looking at my solution i request you to go through the link provided by sir again. That will help you understand my solution better.



Note: the blue shaded areas represent the intersection of the best response functions.

[maecon]

mike buddy you are life saver , ( remind me of giving you a treat in the dse canteen )

now i attempted 28 on the same lead , i have not got the answer but i arrived at the following conclusion :

both people's best response function gives the following result :

EITHER r1<40 and r2<50
OR       r1>50 and r2>60

now my question to you mike is how to decide ?

[Mike]

Careful maecon, try again.

[Mike]

For 28, you can proceed without drawing the graph. Remember in the link sir has mentioned about dominant strategy. Try to think like that.  
B.R1 ={ r1>= 50   if r2>=50
               r1<=50   if r2 < 50
Notice that r1 = 50 is the dominant strategy for player 1 irrespective of what the other player is doinng.
BR2 remains the same as in 27 . so r2 = 60 remains the dominant strategy for player 2 irrespective of what the other player is doing.
So (50,60) is an equilibrium and the good is provided. And each agent gets a utility of 10
 Remember that any dominant strategy equilibrium is a nash but not all Nash equilibrium's are a result of dominant strategy.
Now my only doubt is why there's a deficit

[maecon]

if 50,60 is the answer then tax collected is only 90 (100-60)+(100-50) thus a deficit of 10 :)

[Mike]

Oh. Thanks