HW3 - things, 9 - a, and an interaction term combining both...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ 398 Homework 3 Due Sept. 26, 2008 1) Dixit & Skeath, Chapter 4, problems 2b, 2c. 2) Dixit & Skeath, Chapter 4, problems 3b, 3c. 3) Dixit & Skeath, Chapter 4, problem 10. 4) Dixit & Skeath, Chapter 5, problem 3. 5) Alice and Bob are each considering contributing to a public park which will be enjoyed by all. Alice has $9, of which she’ll contribute $a. Bob has $12 of which he’ll contribute $b. Alice’s payoff depends on the total contribution, a + b, the money she has left over to spend on other
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: things, 9 - a, and an interaction term combining both of these terms, (9-a)(a+b). Thus her payoff, x = a + b + 9 a + (9-a)(a+b) = b + 9 +(9-a)(a+b). Similarly, Bobs payoff is given by y = a + b + 12 b + (12-b)(a+b) = a + 12 +(12-b)(a+b). Find the Nash Equilibrium contributions. Are these contribution levels Pareto Efficient? If not, find the Pareto Efficient levels of contributions....
View Full Document

Ask a homework question - tutors are online