Question

Consider a situation in which Alice and Bob are deciding how to share a plot of land for industrial purposes. The total size of the plot of land is:______
1. Alice's share of the land is A and Bob's share of the land is B.
2. Alice's payoff from her share of the land is A and Bob's payoff from his share of the land is B.

Answer 1

Answer:

2. Alice's payoff from her share of the land is A and Bob's payoff from his share of the land is B.

Explanation:

A payoff matrix could help Alice and Bob in deciding how to share the land. This matrix assigns payoff values to different states of nature. We begin by stating that Alice's payoff from her share of the land is A and Bob's payoff from his share of the land is B, after which payoff values in measurements of the land are assigned to them.