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An economy has two agents and two goods. Utilities are given by UA=min{xA,0.5yA} and UB=min{xB,0.5yB}. The total amount of X in the economy is 10. The total amount of Y is also 10.
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It has been accepted to most policy and development economists that among the most important sets of institution in an economy are those that provide for enforcement of contracts.
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As you know, the principal-agent problem stress the effect of asymmetric information between the principal and the agents on economic outcomes, the equilibrium in a principal-agent
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