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Do not use chatgpt here Answer this properly Two people, A and B, are deciding whether to put effort into producing a public good or
Do not use chatgpt here
Answer this properly
Two people, A and B, are deciding whether to put effort into producing a public good or not. Each person, i, can either choose no effort (s; = (1) or yes effort (s; = 1). The total public good produced is G = ass + (1 a)sg, where a (0, 1). The cost of doing no effort is (). The cost of doing yves effort is 1.5. The payoff to a playver is the total public goods provided (G) minus her personal costs. (a) Given a choice by player B, sg, write down player A's utility from choosing no effort. Given a choice by player B, sg, write down player A's utility from choosing yes effort. Comparing these two utilities, write down player A's best response. [10 marks] (b) Noticing that player B's problem is identical to player A's, what is the unique Nash equilibrinm of this game? [10 marks] (c) In four sentences or less, explain why the Nash equilibrium represents a social dilemma and how this relates to the idea of positive externalities. [10 marks]Step by Step Solution
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