Consider the following two player game: Suppose the players write a contract agr

Question

Consider the following two player game: Suppose the players write a contract agreeing to play (H, H), and player 2 breaches and player 1 does not. What are the payoffs to the players under expectation damages and under restitution damages? Under expectation damages the payoffs are (5, -2). Under restitution damages the payoffs are (3, 0) Under expectation damages the payoffs are (5, 0). Under restitution damages the payoffs are (1, 1) Under either standard payoffs are (4, -1). Under expectation damages the payoffs are (5, -2). Under restitution damages the payoffs are (2, 1) Under expectation damages the payoffs are (3, 0). Under restitution damages the payoffs are (2, 1)

Explanation / Answer

Initially (H,H) => (5,2)

But player 2 breaches.

=> Expectation damages = (5, 0 - 2) = (5, -2)

=> Restitution Damages (when player 1 not get benefits from 2) => (5 - 2, 0) => (3, 0) {because player 2 breaches}

So A option is correct.

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