Two neighboring countries, i = 1,2, simultaneously choose how many resources (in hours) to spendin recycling activities, n. The average benefit (n) for every dollar spent on recycling is:7(n.n) = 10 -r +:and the (opportunity) cost per hour for each country is 4. Country i's average benefit is increasing inthe resources that neighboring country i spends on his recycling because a clean environmentproduces positive external effects on other countries.A. Find each country's best-response function, and compute the Nash Equilibrium (NE), (ri.ri).B. Graph the best-response functions and indicate the pure strategy Nash Equilibrium on thegraph.C On your previous figure, show how the equilibrium would change if the intercept of one ofthe countries' average benefit functions fell from 10 to some smaller number.

The Nash equilibrium refers to the situation where firms independently choose their production…

Two neighboring countries, i= 1,2, simultaneously choose how many resources (in hours) to spend in recycling activities, r. The average benefit (m) for every dollar spent on recycling is: (n.) = 10- +²: and the (opportunity) cost per hour for each country is 4. Country i's average benefit is increasing in the resources that neighboring country / spends on his recycling because a clean environment roduces positive external effects on other countries. A. Find each country's best-response function, and compute the Nash Equilibrium (NE). (ri.ri). B Graph the best-response functions and indicate the pure strategy Nash Equilibrium on the graph. C On your previous figure, show how the equilibrium would change if the intercept of one of the countries' average benefit functions fell from 10 to some smaller number.

Two neighboring countries, i= 1,2, simultaneously choose how many resources (in hours) to spend in recycling activities, r. The average benefit (m) for every dollar spent on recycling is: (n.) = 10- +²: and the (opportunity) cost per hour for each country is 4. Country i's average benefit is increasing in the resources that neighboring country / spends on his recycling because a clean environment roduces positive external effects on other countries. A. Find each country's best-response function, and compute the Nash Equilibrium (NE). (ri.ri). B Graph the best-response functions and indicate the pure strategy Nash Equilibrium on the graph. C On your previous figure, show how the equilibrium would change if the intercept of one of the countries' average benefit functions fell from 10 to some smaller number.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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