Homework answers / question archive / Consider a game between Carina and Wendy, where Carina selects any effort level ee is greater than 0$800e4e2wpxtpC on the job

Consider a game between Carina and Wendy, where Carina selects any effort level ee is greater than 0$800e4e2wpxtpC on the job

Economics

Share With

---

Consider a game between Carina and Wendy, where Carina selects any effort level ee is greater than 0$800e4e2wpxtpC on the job. Assume . The revenue of the firm is equal to . Carina's disutility from effort is  (measured in dollars). Carina and Wendy first jointly determine Carina's compensation package, and then (if they agree) Carina selects her effort. Suppose the contract is of the form w(p) = xp + t, where  is the amount paid to Carina,  is the revenue of the firm and  and  are the contract variables Carina and Wendy decide simultaneously. Assume the bargaining weight of Carina is  = 1/4 and that of Wendy isp_W = 3/4. Which of the following is the equilibrium x and t?

 

Options:

 

x* = 1, t* = -30,000

 

Correct answer is not listed.

 

x* = 0.5, t* = -20,000

 

x* = 0.5, t* = -30,000

 

x* = 1, t* = -20,000