Edgeworth-Box
Assume now that A and B interact in exchange without a social planner, but that one has first-mover advantage. A 0 s utility function is u A[x A, y B] = x 0.5y 0.5 and B has the utility function u B[x B, y B] = x 0.5y 0.5 .
a. What is the TIOLI allocation when A has TIOLI power?
b. Prove that it is Pareto efficient
c. What is the TIOLI allocation when B has TIOLI power?
d. Prove that it is Pareto efficient.