Question: Consider the following reaction function R1: c1 = R1(c2) = { 0, if 5 c2 > cmax 5 c2, if 5 c2 cmax where c1

Consider the following reaction function R1: c1 = R1(c2) = { 0, if 5 c2 > cmax 5 c2, if 5 c2 cmax where c1 is the contribution of player 1 and c2 is the contribution of player 2, cmax is the maximum contribution of each player such that cmax = 3 and 5 is the threshold that must be reached in order for the public good to exist. (a) Graph the reaction function placing c1 on the vertical axis and c2 on the horizontal axis. (b) In the threshold public goods game described above neither player can reach the threshold on their own, i.e. cmax = 3 < T = 5. Suppose that each player's strategy set consists of discrete choices, such that ci = {0, 1, 2, 3}, then each player's utility can be described by the following function: ui = { ci, if ci + ci < T T ci, if ci + ci T Summarize the given information in a strategic form (4x4) table including players, strategies and payoffs. (c) Derive the Nash Equilibrium/Equilibria.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!