Homework2NWLife10

Ifanindividualchoosestoreceivethevaccinationhepaysafix

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Unformatted text preview: contact between a pair of people. A person can contract the disease from any of his neighbors on the graph who are infected, but cannot contract the disease if none of his neighbors are infected. If an individual chooses to receive the vaccination, he pays a fixed cost V and runs no risk of obtaining the disease. If a person chooses not to receive the vaccination, he pays a cost equal to N*X where N is the number of his neighbors who are not vaccinated and X is a fixed cost associated with the chance of contracting the disease. Assume that X is much larger than V. a. Suppose everyone chooses to receive the vaccination. Is this an equilibrium? Why or why not? b. Suppose the government decides to subsidize half of the population by providing them with the vaccination for free (i.e. this half of the population pays 0 and runs no risk of obtaining the disease). Will the other half of the population be more likely to purchase the vaccination now? Briefly explain why or why not. 3. (20 points) This problem considers networked...
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