please only do: if you can teach explain each part A small business owner can invest any amount of effort e > 0 to produce output valued at2e. The cost to the owner of effort level e is e². The government, which seeks to maximizeits own revenue, may expropriate some fraction 7 € [0, 1] of the owner's output. The owner'spayoff to choosing e if the government expropriates fraction 7 is 2e(1-7) - e².(a) Consider a sequential game in which the owner first chooses e and the government chooses7 after observing the owner's choice. Find all subgame perfect equilibria of this game.(b) Now consider a sequential game in which the government first chooses 7 and the ownerchooses e after observing the government's choice. Find all subgame perfect equilibriaof this game.

Value of product = 2e Cost of production = e2 Government expropriates a fraction = 2e (1-t ) - e2 In…

A small business owner can invest any amount of effort e ≥ 0 to produce output valued at 2e. The cost to the owner of effort level e is e². The government, which seeks to maximize its own revenue, may expropriate some fraction 7 € [0, 1] of the owner's output. The owner's payoff to choosing e if the government expropriates fraction 7 is 2e(1-7) - ².

A small business owner can invest any amount of effort e ≥ 0 to produce output valued at 2e. The cost to the owner of effort level e is e². The government, which seeks to maximize its own revenue, may expropriate some fraction 7 € [0, 1] of the owner's output. The owner's payoff to choosing e if the government expropriates fraction 7 is 2e(1-7) - ².

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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