A couple Gini and Johnny are trying to decide what to do once the lockdown
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A couple Gini and Johnny are trying to decide what to do once the lockdown

4. A couple Gini and Johnny are trying to decide what to do once the lockdown is over. Gini would rather go to the beach, but the husband would rather go to the footy match. Both would prefer to go to the same place rather than different ones. The game is as follows:


a) Write down the utility function of both Gini and Johnny according to FehrSchmidt model with the envy and guilt parameters.

b) If Gini had prior knowledge that Johnny is going to the footy match, for what values of envy or guilt parameter will she definitely attend the footy match? Explain your answer.

c) If instead, Johnny had prior knowledge that Gini is going to the beach, for what values of envy or guilt parameter will he definitely attend the footy match? Explain your answer.

Hint
Economics"U stands for ""utility."" MU stands for Marginal Utility. The sum of utils acquired from each unit of consumption equals total utility. As more units are eaten, each unit of consumption is predicted to provide slightly less utility."...

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