Players must allocate a sum of money between two types of sushi. Prices are given, and the utility function is Cobb Douglas. A player knows the utility from the next piece of each type and chooses one piece at a time until the budget is depleted.
Key Learning Objectives:
- Marginal Utility Per Dollar: When allocating a fixed budget, sequentially choosing the item offering the highest marginal utility per dollar will generally lead to the utility-maximizing budget allocation.
- Familiarity with Cobb Douglas Utility: Students will gain familiarity with some of the implications of the Cobb Douglas utility function, including the result that an item’s optimal budget share is equal the ratio of its exponent to the sum of all exponents.
- Monotonic Transformations: A monotonic transformation of a utility function (e.g., multiplying by two) does not affect the utility-maximizing consumption bundle.
- Main Courses: microeconomics; decision making; strategy
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