Public Good Contribution: Three players live in a town, and each can choose to contribute to fund a streetlamp. The value of having the streetlamp is 3 for each player, and the value of not having it is 0. The mayor asks each player to contribute either 1 or nothing. Each player makes a decision without knowing others’ contributions. If at least two players contribute then the lamp will be erected. If one player or no players contribute then the lamp will not be erected, in which case any person who contributed will not get his money back. Write down the strategy sets of each player, their payoffs, and find all pure-strategy Nash equilibria.

Public Good Contribution: Three players live in a town, and each can choose to contribute to fund a streetlamp. The value of having the streetlamp is 3 for each player, and the value of not having it is 0. The mayor asks each player to contribute either 1 or nothing. Each player makes a decision without knowing others’ contributions. If at least two players contribute then the lamp will be erected. If one player or no players contribute then the lamp will not be erected, in which case any person who contributed will not get his money back. Write down the strategy sets of each player, their payoffs, and find all pure-strategy Nash equilibria.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 1MC

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