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Microeconomic Theory

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.7P

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Question

Suppose that each player i is only concerned about his own material payoffs with u_i(x_i) = x_i. Derive the Nash equilibrium of the game.

Consider the following 3-player public goods game. Players 1, 2, and 3 have the same initial
endowment y and simultaneously choose to contribute to a public good. If player 1 contributes
C1, player 2 contributes c2, and player 3 contributes c3, then player i's monetary payoff is
xi (C1, C2, C3) = y − ci+m × (c1 + C2 + C3)
where 3 <m< 1.

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12.....QUESTION.....
Two neighboring homeowners, i = 1,2, simultaneously choose how many hours to spend maintaining a lawn. The AVERAGE benefit per hour for i is (e.g., it is for homeowner 1) And the (opportunity) cost per hour for each homeowner is 4. (a) Give each homeowner’s (net) payoff as a function of and . (b) Compute the Nash equilibrium.

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