Suppose there is a joint project that generates an amount 10 for each of the individuals A and B, provided the sum total of A's and B's investments in the project is at least 7. Suppose A's investment is denoted by x and B's by y, where r and y can take any values in {0,1,2,3,4..8,9,10}. A player always has to incur the cost of the investment (equal to æ or y respectively) and gets the benefit if and only if the project goes ahead. Suppose each player is interested in his own net benefit (benefit-cost) and players choose their investment levels simultaneously. The following relate to pure strategies. (a) Is there a Nash equilibrium in which both players invest 0? (b) Is there a Nash equilibrium in which one player invests 0 and the other does not? (c) What is the lowest payoff a player can get in any Nash equilibrium?

Suppose there is a joint project that generates an amount 10 for each of the individuals A and B, provided the sum total of A's and B's investments in the project is at least 7. Suppose A's investment is denoted by x and B's by y, where r and y can take any values in {0,1,2,3,4..8,9,10}. A player always has to incur the cost of the investment (equal to æ or y respectively) and gets the benefit if and only if the project goes ahead. Suppose each player is interested in his own net benefit (benefit-cost) and players choose their investment levels simultaneously. The following relate to pure strategies. (a) Is there a Nash equilibrium in which both players invest 0? (b) Is there a Nash equilibrium in which one player invests 0 and the other does not? (c) What is the lowest payoff a player can get in any Nash equilibrium?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 4E: In the Southern Company Managerial Challenge, which alternative for complying with the Clean Air Act...

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