Tom and Al are the only two members of a household. Each gets satisfactionfrom three things: his income, his safety at work, and his income relative to hisroommate”s income. Suppose Tom and Al must each choose between two jobs:a safe job that pays $100 per week and a risky job that pays $130 per week.The value of safety to each is $40 per week. Each person evaluates relative incomeas follows: Having more income than his roommate provides the equivalentof $30 per week worth of satisfaction; having less implies a reduction of$30 per week worth of satisfaction; and earning the same income as his roommatemeans no change in satisfaction. Will Tom and Al choose optimallybetween the two jobs?
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Tom and Al are the only two members of a household. Each gets satisfactionfrom three things: his… 1 answer below »