4. Free riding. (10 points) Two microeconomists work on a team project. Assume they work independently, and it is not possible for them to monitor each other. No one likes working, and the cost of efforts is measured in dollars. Each player can decide to work on the project or not, and the cost associated to working on the project is $6. The quality and hence the profit of the project is determined by the joint efforts of the two players if one of them works, they earn a total of $10; if they both work, they earn $20, and if none of them work, they earn $0. Assume players divide the profit equally among them. Hence, each player's payoff is his share of the profit minus his cost. (a) (1 points) What is the set of actions for each player? (b) (1 points) Draw the game's payoffs matrix. (c) (2 points) Find each player's dominant strategy. What is the resulting Nash equi- librium in this game? Why is free riding a problem in this case? 2