Question
please help me .. someone answered in a wrong way.. please answered this question who know in a right way... (Public Good) Two residents develop
please help me .. someone answered in a wrong way.. please answered this question who know in a right way... (Public Good) Two residents develop their communal area into a community garden. The marginal benefit of each resident i = 1, 2 from the garden is given by MB1 = 100 Q and MB2 = 60 Q, where Q is the size of the garden in m2 . The cost of developing the communal area into a garden is C(Q) = 50Q. Assume that the community garden is non-rivalry and non-excludable. 1) Calculate the total marginal benefit from the garden as a function of Q. What is the optimal size of garden. What is the benefit of the garden to each resident? 2) Suppose the residents independently and simultaneously develop the garden at their own cost. To be specific, each resident i = 1, 2 develops qi at the cost of Ci(qi) = 50qi and the size of the community garden is jointly determined by Q = q1 + q2. What is the size of the garden developed by each resident in equilibrium? What is the payoff to each individual. (Hint: Find the best response function BRi(qj ) of each resident i against the opponent js choice of qj to derive the Nash equilibrium.) 3) Now suppose residents develop their own private walled-garden, which is excludable. What will be the size of private garden developed by each resident? What will be their payoff?
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