Question 5 A group of N governments consider whether or not to take action (e.g., apply new laws) on cleaning up the river that they share. For each government, the cost of taking action is c = 3. Regional water quality will be significantly improved as long as at least one country takes action. The benefit from improved regional water quality is b = 5 for every government. There is no benefit if the regional water quality is unchanged. a.) * When there are two countries in the group (N = 2), what is the probability p with which each country does not take action in the symmetric mixed-strategy Nash equilibrium? b.) * When there are three countries in the group (N = 3), what is the probability p with which each country does not take action in the symmetric mixed-strategy Nash equilibrium? c.) Explain intuitively the direction of the change in p as N increases from 2 to 3.

Question 5 A group of N governments consider whether or not to take action (e.g., apply new laws) on cleaning up the river that they share. For each government, the cost of taking action is c = 3. Regional water quality will be significantly improved as long as at least one country takes action. The benefit from improved regional water quality is b = 5 for every government. There is no benefit if the regional water quality is unchanged. a.) * When there are two countries in the group (N = 2), what is the probability p with which each country does not take action in the symmetric mixed-strategy Nash equilibrium? b.) * When there are three countries in the group (N = 3), what is the probability p with which each country does not take action in the symmetric mixed-strategy Nash equilibrium? c.) Explain intuitively the direction of the change in p as N increases from 2 to 3.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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