Mihret-Abeber

Prem
Set Solutions

1) i) Grill
Proving that
if Jack
justify alternative in
can a menu B so can .

[xt /R , (3 Jack alternative

> B
justify
:
a -
can att

[xEBIRi] e ExtB/R , (x)vRe(x] : Jill can use both &,

R2

( aEqx(B)R (x) ,

wExEBIRz(x17
C
&
EExeBIRiC3 Till
justify a in 13

ii) In menu B Jill Satisfy desires

2 Jack
any weakly

If jack chooses alternative a in menu is

=> a is
justifiable by R1 and maximizes M :
JB : [xEB / Ri(3
Jills Set :
JB =

ExeB(Ri@3 EXEB/R2(] : alternatives

justifiable by Fill .

JB ? J'B E = U(x) for JB = may VC) for jus

Es u(b) (a) o
Till satisfies her true desires
weakly better

than jack in
any menu .
 ↑

WTB :
willingness to buy
WTS :
willingness to sell

2) a 2018 :
Agent A utility = $50 so WTS P150
$60
Agent B
Utility WTB P1 60
=
jy .

50 1 Price 60

the trade and agent will be the final

· will
happen B owner

2019 : Agent A utility = $50 so

WTB PC50-

$60
Agent B
Utility P260
=
jy
WTS

601 PE50
& Two
agents will not tradeso Agent B is still the
owner
.

b) 2018 :
Agent A : WiS = P150 + 20 : 70 5) 20 :
Disrtility .

1) B :
WTB =
PEGU ticket holder

70 Price 160
not
Attending
The trade will A the ticket
· not happen and will own
bla
there is both will to
price agree
no

2019 A WTB
Agent P = g0
:
:
=

WT$
Agent B 20 80
: =

P160 + =

80 = PE50

and I will be the

= trade will not happen owner
 3) a) S :
Es Sch , ,
bio

Si : p(si) =
P
S2 : p(Sc) = 1- P

u(X) = Y

i) SElnotEnter = O

ii) SErpuy =
p(1 b) -
+ (1 p) ( b)
- .
-
= p -b
Szupry = p by
-

= P > b

m) Sensel = P .

(-1 + b) + (1 p) b
-
.
=
P +b Strsell : -Plb To = PLb

b) P(s) =

+P(x) =
2
4

q(si) =

= q(s) =
1
4

i) MErnot Enter = o

(1 b) t
b
MEUsuy b
-b
<

2
ii) =
Merry
=
min
-

, =

ii) Mersey =
min

(t 3 b) , + Mersel :
+0 = b>
2
I

=b
=> If the price is blu
(t . 2] the agent will prefer not

to enter the asset

market.
4) S = 23 ,
32 ,
533

a =

( Evp(a) =
p(s , ) v(x) + p(s)v(y) + p(s))v(z)

g(s) ) 9(52) AfS2)

q(53)
:

;
=
0

p(s)
=

p(si)
S

p(s ) , + p(s) +

sI
6 :

Evg(b) =
q(s) v(x) +
q(s)v(y) + q(z)v(z)

Pep(s)
Eva(b) = u(X) + )u(y) + 0

p(s) + P(sz)