1. The technology of interaction for a contractual relationship is given by the matrixbelow.2HL1H5,50,8L7,01,1Suppose the players write an incomplete contract stating that they agree to playthe jointly-efficient outcome (that which maximizes the joint payoff as found in lastweek's homework). Assume that the court can verify exactly the outcome of produc-tion.(a) Suppose that the court uses expectation damages. Can the jointly-efficient outcome be implemented? Briefly explain.(b) Suppose that the court uses reliance damages. Can the jointly-efficientoutcome be implemented? Briefly explain.(c) Suppose that the court uses restitution. Can the jointly-efficient out-come be implemented? Briefly explain.

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1. The technology of interaction for a contractual relationship is given by the matrix below. 2 H L 1 H 5,5 0,8 L 7,0 1,1 Suppose the players write an incomplete contract stating that they agree to play the jointly-efficient outcome (that which maximizes the joint payoff as found in last week's homework). Assume that the court can verify exactly the outcome of produc-

1. The technology of interaction for a contractual relationship is given by the matrix below. 2 H L 1 H 5,5 0,8 L 7,0 1,1 Suppose the players write an incomplete contract stating that they agree to play the jointly-efficient outcome (that which maximizes the joint payoff as found in last week's homework). Assume that the court can verify exactly the outcome of produc-

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.6P

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