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Unformatted text preview: 1 ; h 2 ) , the value of the subsidy that gets approved is 10 ( h 1 + h 2 ) + & h 1 h 2 , where & is a constant. Then, the subsidy well be splitted evenly between the two rms. Suppose each rm tries to maximize its prot, i.e., the subsidy he gets minus the cost of its e/ort. (a) Suppose & = 2 , what are the rationalizable strategies for each rm? (b) suppose & = 2 , what are the purestrategy Nash Equilibria? 3. Suppose we make one modication on Q.1: rm 1 moves rst, i.e., it chooses h 1 . After observing h 1 , rm 2 chooses h 2 . (a) what are the strategies for both rms? (b) what are the subgames? (c) suppose & = 2 , what are the Subgame Perfect Nash Equilibria? 1...
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This note was uploaded on 02/09/2012 for the course ECON 401 taught by Professor Siyang during the Spring '11 term at Rice.
 Spring '11
 Siyang
 Economics

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