Consider a two-players game where each player can either contribute (C) to a public good or free ride (defect, D). If a player chooses to contribute, he pays a fixed private cost c. The public good benefits both players: the benefit is b if only one player contributes, while the benefit is k × b if both contribute, with k > 1.

1. Give the normal-form representation of this game. 2. Write down the payoff matrix.

(a) For which values of k is this a Prisoner’s Dilemma when b = 3 and c = 6?

(b) What equilibrium does the game have when b = 3 and c = 6 and k ∈ (2,3)?

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The following Bayesian game models the situation Players The two people States The set of states is strong weak Actions The set of actions of each player is Oght yield Signals Player 1 receives the sa... View the full answer