Will and Grace have adjoining unfenced back yards and each has just adopted a new puppy. Will values a fence between their yards at $250 and Grace values a fence between their yards at $200. The cost of building the fence is $300, which will be split equally if they both agree to build the fence. Therefore, their payoff matrix is as follows. If Will decides to build the fence, then Grace will earn a higher payoff by ______, and if Will decides to not build the fence, then Grace will earn a higher payoff by ______.

Question

Will and Grace have adjoining unfenced back yards and each has just adopted a new puppy. Will values a fence between their yards at $250 and Grace values a fence between their yards at $200. The cost of building the fence is $300, which will be split equally if they both agree to build the fence. Therefore, their payoff matrix is as follows.  If Will decides to build the fence, then Grace will earn a higher payoff by ______, and if Will decides to not build the fence, then Grace will earn a higher payoff by ______.

Quizplus · Accepted Answer

If Will decides to build the fence, Grace will incur a cost of $50 (payoff of -$50) for building the fence, which is less than her valuation of the fence ($200). Therefore, Grace will be worse off by helping to build the fence. On the other hand, if Will decides not to build the fence, Grace can enjoy her backyard without incurring any cost of building a fence. Hence, Grace will be better off by not helping to build the fence. Therefore, the best choice for Grace is to not help build the fence, and the best choice for Will depends on his personal preference - either to build a fence (payoff of $250) or not to build (payoff of $0).

Will and Grace Have Adjoining Unfenced Back Yards and Each