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game theory question. Question 3: Two players (i = 1, 2) are involved in a joint project. Each player chooses an effort level s; 2

game theory question.

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Question 3: Two players (i = 1, 2) are involved in a joint project. Each player chooses an effort level s; 2 0. Player 1 must make her choice first, followed by Player 2, who observes how much effort Player 1 puts in. Expending effort comes with a quadratic cost of 12 2 for each player, and the 2 joint project yields an amount of $1 + $2 + -12 to each player. Find the subgame perfect Nash equilibrium of this game. Which player benefits the most in this project? Explain. (30 marks)

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