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Question 5. Three firms use water from a lake. Each firm has two possible actions: treat sewage (7) or dump sewage (D). If no or
Question 5. Three firms use water from a lake. Each firm has two possible actions: treat sewage (7) or dump sewage (D). If no or only one firm dumps sewage, the lake remains clean. If two or more firms dump sewage, the lake becomes polluted. Each firm gets a revenue of 4 if the lake remains clean, and a revenue of 1 if it is polluted. The cost of treating sewage is I for each firm. There is no cost to dumping sewage. Each firm's payoff is given by its revenue minus sewage treatment cost, If any. (a) Describe this situation as a normal form game using payoff matrices. (b) Is there a strictly dominated strategy for each player? (c) Find all pure strategy Nash equilibria of this games (d) Is there any equilibrium in which the lake is polluted? If you, which one(s)? (e) Is there a symmetric Nash equilibria in which all firms play the same mixed strategy a"
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