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6 In the internet era, many individuals are concerned about their privacy but they also value benefits from online interactions. Every individual likes others to

6

In the internet era, many individuals are concerned about their privacy but they also value benefits from online interactions. Every individual likes others to share their data, as this improves applications, but they would rather keep their data private. Let xi = 0, 1 denote the action to share data online (e.g. post photos in Instagram) for every member of society. The utility function is ui(x) = j=i xj axi (i.e. each i enjoys when other individuals, j share data but dislike when they do so xi).(a) Argue that if a < N 1, where N is the size of the population, it is efficient for everyone to join. Can you describe the set of efficient allocations for a = 2 and N = 4?

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