Glen's Friend Andre Is a Big Strong Guy

question 123

Essay

Glen's friend Andre is a big strong guy. Andre will not allow anyone to harm Glen. Glen enjoys teasing people. In fact, Glen's marginal benefit of teasing people is given by: MB(Q) = 75 - 10Q. Generally, people do not enjoy Glen teasing them. Thus, they retaliate to Glen's teasing. Without Andre around to protect Glen from the retaliation, Glen's marginal cost of teasing people is
MC(Q) = 20Q due to the retaliation. However, with Andre around, Glen perceives his marginal costs of teasing to always be zero as no one will retaliate with Andre around. This is because Andre will step in to protect Glen from retaliation. Without Andre around, what is Glen's choice for teasing? How much does Glen increase teasing when Andre's around? Is Glen's behavior characteristic of a moral hazard or adverse selection?

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Definitions:

Wilcoxon Rank Sum Test

A statistical technique for comparing two independent samples to ascertain if their mean ranks vary across the populations, without making assumptions about the underlying data distribution.

Visual Scanning Behavior

The pattern and manner in which individuals visually survey or scan an environment or visual input, often studied in psychology and human-computer interaction.

Eye-Movement Rates

The speed and pattern of eye movements, often studied in psychology and behavioral research to understand reading habits, attention, and information processing.

Wilcoxon Rank Sum Test

A non-parametric test for assessing whether two independent samples come from the same distribution.