Unformatted text preview: depends on money contributions to the mayor's reelection fund. The project has value V in total. The mayor is somewhat biased in favor of firm 1, which is run by his niece. If firm 1 contributes x 1 and firm 2 contributes x 2 , then the shares of the project going to firms 1 and 2 are s 1 and s 2 , respectively, where s 1 ( x 1 , x 2 ) = 2 x 1 / (2 x 1 + x 2 ) and s 2 ( x 1 , x 2 ) = x 2 / (2 x 1 + x 2 ). The payoff to firm i is π i ( x 1 , x 2 ) = s i ∙ V  x i , i = 1, 2, s 1 + s 2 = 1. Calculate the Nash equilibrium contributions for each firm. (Hint: you may need to apply firstorder conditions to the optimal problem.)...
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This note was uploaded on 07/26/2010 for the course ECON ECON003  taught by Professor Das during the Winter '09 term at UC Riverside.
 Winter '09
 DAS
 Economics

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