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Please, can you solve with calculations? Thank you in advance. Section II Exercise n. 1 Consider an industry with / firms. Each firm is lobbying

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Please, can you solve with calculations? Thank you in advance.

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Section II Exercise n. 1 Consider an industry with / firms. Each firm is lobbying the Goverment in order to grant to all firms in the industry a subsidy. Denote by /1, the hours devoted to the lobbying activities by firm / and assume that the cost for each firm is given by C,(h,) = why where w, is a positive constant. The value of the subsidy (given that the proposal is approved) for each firm is given by the following expression: a > ,h, + (] [, h, ) where a and Bare positive constants. la) Suppose that the firms choose simultaneously and independently the number of hours to be devoted to the lobbying activities. Show that for each firm there will exist a dominant strategy if and only 6 =0. 1b) Derive the dominant strategy. lc) Suppose that /=2. Find the Nash equilibrium of the game when (i) w # w, and (ii) ij = w2 1d) Which would be the outcome in the case in which the firm could cooperate (consider the case of equal cost)

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