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Problem 7 (2 points) Consider the following utility function: u,- = 5 c,- + 0.8 (c, + c_,-). Suppose that both individual i and i
Problem 7 (2 points) Consider the following utility function: u,- = 5 c,- + 0.8 (c, + c_,-). Suppose that both individual i and i must choose how much money to contribute (c) to a public account (this account maybe used to pay for environmental enhancements such as air quality improvements). Each individual can only contribute integer amounts including zero, i.e. c, E N0 = {0, 1, 2, 3,4, 5}. (a) Create a normal form game that shows players, strategies and utilities. (b) Using the table you created in (a), derive the Nash equilibrium and the social optimum. (c) Discuss why this is a social dilemma situation and What can be done to achieve efciency
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