Question: Two players are engaged in a contest while exerting effort e1 and e2 (players 1 and 2, respectively). Effort level ei[0,wi], i{1,2}, where wi serves
Two players are engaged in a contest while exerting effort e1 and e2 (players 1 and 2, respectively). Effort level ei[0,wi], i{1,2}, where wi serves as a "budget" of effort (that is, there are no direct costs as in the practice exam question). The probability of player i winning is determined by ei/(ei+ej), ij. As a prize, the winner gets the leftover from their own budget and the leftover of the opponent's budget. a) Write down expected utility equations for both players (use appropriate subscripts, 1 and 2). b) Find the best response equations for both players. c) Find the Nash Equilibrium of this game
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