Consider the following diagram, representing the Nash Equilibrium of the \'incom
ID: 1119923 • Letter: C
Question
Consider the following diagram, representing the Nash Equilibrium of the 'incomplete contracts' case. Select the correct statements. A's bestl response fundtion As partiopation a. Interest fador, Select one or more: a. The resulting Nash equilibrium is Pareto efficient, because borrower and lender are both doing the best they can. D b. At the Nash equilibrium, An earns revenues that are above his fall back position. O c. Pei maximizes her profit subject to An's fall back position. d.Pei maximizes her profit subject to An's best response function. e. The blue curve is Pers iso-profit curve. As we move South-East, her profits increase.Explanation / Answer
a. The resulting Nash equilibrium ispareto efficient, because borrower and lender are both doing the best they can.
e. The blue curve is Pei's iso-profit curve. as we move South-East, her profit increase.