lecture 10

Question 1

what is the model of choice and conflict?

Answer 1

rules of the game (institutions) matter to determine final allocations.
MRS and MRT in the game
property and power→ mutual gain and conflict

Question 2

what is the reservation indiference curve?

Answer 2

show combination that would give player 1 the same level of utility she would expect to get from disobeying player 2 and doing her next best alternative instead

it gives the smallest level of utility such that player 1 would still work for player 2

Question 3

what is an outside option?

Answer 3

those where player 1 has, in theory, an option outside the situation she is in.
if we couldn’t do that, we would get more or less pay for more or less work, but in the end we would have to stay there

Question 4

how can you know if an allocation is pareto efficient?

Answer 4

must have 2 important properties:
- MRS=MRT
- no grain is wasted (it is consumed by the two players)

Question 5

what is the pareto efficiency curve?

Answer 5

the set of al pareto-efficient allocations