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Hi , I'm struggling to answer this game theory question(economics ) can u help please Two workers, N = {1,2}, are undertaking a joint project.
Hi , I'm struggling to answer this game theory question(economics ) can u help please
Two workers, N = {1,2}, are undertaking a joint project. Each worker i = 1,2 must decide how much effort at 2 0 to put into the project. The payoff to each worker when they exert effort levels E21 and e2 is equal to 91 + ez + gelez. Exerting an effort level equal to el- costs each worker i = 1,2 an amount C(ei) = gef. Therefore each worker's net payoff from exerting effort level at when the other worker exerts effort ej (j at i) is equal to Ill-(Bi; 9;) = ei + e,- + gage,- Eel-2. a. Suppose that the workers choose their effort levels simultaneously. What are the resulting Nash equilibrium effort levels? [5 marks] b. Now suppose that workers choose their effort levels sequentially. Worker 1 puts in their effort rst, before passing the project on to worker 2. What are the subgame perfect Nash equilibrium effort levels? [5 marks]Step by Step Solution
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