The production of two workers is given by R(e1,e2) =e1+e2+e1e2. Production is shared equally among the two workers. Exerting effort ei implies a cost of C(ei) =ei^2/2 for worker i.

a) Find the level of efforts that maximize joint profits.

b) In a one-shot game, with (0,1), find the best-response function of each worker and the NE. Compare it with your answer in a).