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* The prompt does not explicitly state <b>Each agent's maximization problem</b> <math>\max_{e_{i}}[s_{i}\sum_{j\neq i}z(e_{j})+s_{i}z(e_{i})-e_{i}]</math> Note that decisions are made nonif the agent chooses to work, his utility is <math>s_{i}\sum_{j\neq i}z(e_{j})+s_{i}z-cooperatively or without transfers between employees1</math> If he chooses to shirk his utility is <math>s_{i}\sum_{j\neq i}z(e_{j})</math>. Therefore, but I will assume he'll work if <math>s_{i}z-1>0 \iff s_{i}z>1 \iff s_{i}>\frac{1}{z}</math>. <b>Note</b> that neither of these are feasiblenot everyone can have <math>s_{i}>\frac{1}{z}</math> because <math>\frac{N}{z}>1</math>.
BPP Field Exam 2010 Answers (view source)
Revision as of 19:36, 28 March 2011
, 19:36, 28 March 2011no edit summary
* The prompt does not explicitly say that everyone must receive the same share. Nonetheless, many of the relevant papers assume that this is the case. As such, will solve the problem both ways.
* The prompt also does not explicitly require a balanced budget. However, no source of funding for the agents is mentioned besides the combined output V of the individual agents. As such, I will assume that the budget balance restriction must hold.
(a) <i>My answer, assuming that some shares can be different</i>.
