1. Chef X wants to start a restaurant in Exeter, and asks local bank Y for a loa

Question

1. Chef X wants to start a restaurant in Exeter, and asks local bank Y for a loan of £40. X has no liquid assets and is risk neutral. X and Y can not agree on the type and name of the restaurant. X wants to start a fancy sea food restaurant and call it Exeter Fish. In case of the fish restaurant, X earns £80 with probability 2/3 and £38 with probability with 1/3. And Y gets £60 with probability 2/3 and £0 with probability with 1/3. While Y wants to open a restaurant specializing in sandwhiches called McExe. If McExe opens then Y gets £60 and X gets £40.
If you are the social planner who wants to maximize the social welfare, who should
get to decide the type and the name of the restaurant? If the probability of success
of the fish restaurant is 1/3 and the probability of failure is 2/3 what would you
recommend?

Explanation / Answer

i did this in my notebook.....i will send it to ur inbox so just gimme a lifesaver rating.....actually i dont do this but because of the circumstances i am forced to do so

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