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Unformatted text preview: Its interesting that understanding your opponents incentives helps you figure out what to do. 3. Outcomes where one player is Passive and the other is Aggressive are Nash Equilibria. 4. The Nash Equilibria are (T1,L2); and (T2,R2). Note that (B2,L2) is a Pareto improvement over each of these, so that neither is Pareto Efficient. 5. b) There are four Nash Equilibria; three involve two people contributing and one person not contributing. The fourth involves nobody contributing. c) Its rare for contributions to public goods to spontaneously arise, except perhaps as a prestige contribution, say to a university, or a bequest. When is that last time you heard of people making a large contribution to an elementary school. People wont even pick up trash along a public trail. Usually contributions to a public good are coordinated through a club which helps make everyones effort publicly observable which helps verify that no one is shirking....
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- Spring '07