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RE: efficient breach (c(p)-line and optimal i*)

by Kirstein on 01 Feb. 2010 19:36 Hi (to avoid confusion; John Hey is a famous game theorist), and thanks for breaking the ice here! I hope there are many to follow, in particular as I will not be in MD for about two weeks. On slide 71 it was assumed that B‘s valuation v(i) depends on the reliance investment: v(0)=0, v(10)=200, v(34)=230. This is the reason why v(i) has to be taken into account when determining the (socially) otpimal i*, as it is efficient for B to have the item in 2/3 of the cases, whereas T should have it with probability 1/3. Thus, with prob. 2/3, v(i) enters the welfare function that is to be optimized. Note that this optimization program is a discrete one, as i can assume only two values (10 or 34; and 0 if you want). Hence, calculus is of little help here (or would be a bit too much). That‘s all with regard to the first question, I guess, so let me better submit this. All the best, RK Web search, Forum search for efficient breach c p line opti ...