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Two junior associates, i = 1, 2 work for a partner in a law firm. Each associate contributes effort li to prepare a brief for
Two junior associates, i = 1, 2 work for a partner in a law firm. Each associate contributes effort li to prepare a brief for an upcoming case. The efforts of the associates contribute to the quality of the brief, and the final product is "more than the sum" of its parts. In particular, given choices (ei, ez), the quality of the final product is ei + e2+e1e2. The first two terms represent the individual efforts of each associate, while the third term represents the additional benefits from their interactions in a team. Each associate also has an effort cost, cei = le? Each associate cares about winning the case (whether or not he or she remains part of the firm), and therefore benefits when a high-quality brief is produced. Each associate also pays his or her own effort cost. Thus, each associate's payoff is 1 u (el. 2) = eite2+ 416-91 1 1 u(61. ez) = ei +e+4219-012 e-se Assume throughout that the associates choose their efforts simultaneously. (e) What is associate i's best response to ei = 0? (f) Is there a Nash equilibrium in which both associates quit the firm, ei = e2 = 0? Explain your answer in a sentence or two. Two junior associates, i = 1, 2 work for a partner in a law firm. Each associate contributes effort li to prepare a brief for an upcoming case. The efforts of the associates contribute to the quality of the brief, and the final product is "more than the sum" of its parts. In particular, given choices (ei, ez), the quality of the final product is ei + e2+e1e2. The first two terms represent the individual efforts of each associate, while the third term represents the additional benefits from their interactions in a team. Each associate also has an effort cost, cei = le? Each associate cares about winning the case (whether or not he or she remains part of the firm), and therefore benefits when a high-quality brief is produced. Each associate also pays his or her own effort cost. Thus, each associate's payoff is 1 u (el. 2) = eite2+ 416-91 1 1 u(61. ez) = ei +e+4219-012 e-se Assume throughout that the associates choose their efforts simultaneously. (e) What is associate i's best response to ei = 0? (f) Is there a Nash equilibrium in which both associates quit the firm, ei = e2 = 0? Explain your answer in a sentence or two
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