2. Two people, A and B, are deciding whether to put effort into producing a public good or not. Each person, i, can either choose no effort (s; = 0) or yes effort (s; = 1). The total public good produced is G = SA + SB. The cost of doing no effort is 0. The cost of doing yes effort is 1.5. The payoff to a player is the total public goods provided (G) minus her personal costs. (a) Given a choice by player B, SB, write down player A's utility from choosing no effort Given a choice by player B, SB, write down player A's utility from choosing yes effort. (c) Comparing these two utilities, write down player A's best response. Noticing that player B's problem is identical to player A's, what is the unique Nash equilibrium of this game?
2. Two people, A and B, are deciding whether to put effort into producing a public good or not. Each person, i, can either choose no effort (s; = 0) or yes effort (s; = 1). The total public good produced is G = SA + SB. The cost of doing no effort is 0. The cost of doing yes effort is 1.5. The payoff to a player is the total public goods provided (G) minus her personal costs. (a) Given a choice by player B, SB, write down player A's utility from choosing no effort Given a choice by player B, SB, write down player A's utility from choosing yes effort. (c) Comparing these two utilities, write down player A's best response. Noticing that player B's problem is identical to player A's, what is the unique Nash equilibrium of this game?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Answer part C please
Transcribed Image Text:2. Two people, A and B, are deciding whether to put effort into producing a
public good or not. Each person, i, can either choose no effort (s; = 0) or
yes effort (s; = 1). The total public good produced is G = SA + SB. The
cost of doing no effort is 0. The cost of doing yes effort is 1.5. The payoff
to a player is the total public goods provided (G) minus her personal costs.
(a) Given a choice by player B, SB, write down player A's utility from
choosing no effort
Given a choice by player B, SB, write down player A's utility from
choosing yes effort.
(c) Comparing these two utilities, write down player A's best response.
Noticing that player B's problem is identical to player A's, what is
the unique Nash equilibrium of this game?
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