Re: Isi 2016

Posted by Smith on Mar 20, 2018; 6:10pm
URL: http://discussion-forum.276.s1.nabble.com/Isi-2016-tp7608865p7608869.html

Your answer seems right to me, but i don't get what is the fallacy in my approach. In part ii) also if you notice we get theta= 1/2 by equating alpha and beta and putting it in alpha+beta=1, s.t, alapha+alpha=1 and alpha =beta = 1/2
I have used the same approach for this part, then why is it seeming incorrect.

For μ>1 The only pareto optimal point would be 0,1 i.e B consuming the whole cake, because in this case, A is too altruistic and is giving more weightage to B's consumption than to his own, so even at 0,1 A will manage to get more utility than B and B would be at his maximum too. Hence this point is the equilibrium point as well.