Non-verifiable states. Consider the two-person, two-state economy described at the beginning of this section and suppose that one of the individuals cannot observe which state has occurred. Use an...

Non-verifiable states. Consider the two-person, two-state economy described at the beginning of this section and suppose that one of the individuals cannot observe which state has occurred. Use an Edgeworth box to illustrate your answers to the following questions. (a) What does this imply about her endowments and utility function? (b) What would happen if she wrote a state-contingent contract with the other individual? (c) What allocations would be in the core of the economy?