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BPP Field Exam 2010 Answers (view source)
Revision as of 18:42, 29 March 2011
, 18:42, 29 March 2011→Question B1.3
Note that CARA utility is <math>u(c)=1-e^{-\rho c}</math>. An employee i's utility from working (if others work) is <math>A=1-\exp[-\rho(\frac{1}{N}\sum_{i\neq j} z(e_{j})+\frac{1}{N}z(e_{i})-1)]</math>.
If employee works but others aren't, the lottery is triggered and employee i's utility is <math>B=\frac{1}{N}(1-\exp[-\rho(\sum_{i\neq j} z(e_{j})+z(e_{i}))])</math>.
If employee i does NOT work, the lottery is triggered and his utility is: <math>C=\frac{1}{N}(1-\exp[-\rho(\sum_{i\neq j} z(e_{j}))])</math>
I will now show that <math>A>C</math> and <math>B>C</math>-- in other words, working is better than shirking no matter what the other players do.
===Question C1: Agenda Control and Status Quo===
