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Two partners, PX and PY, share profit given by 4(x + y + cxy) where x is the level of effort by Player X(PX) and

Two partners, PX and PY, share profit given by 4(x + y + cxy) where x is the level of effort by Player X(PX) and satisfies 0 x 4, and y is the level of effort by Player Y(PY) and satisfies 0 y 4. The cost of effort is given by x 2 for PX and y 2 for PY. Hence the payoffs are given by 2(x + y + cxy) x 2 for PX and 2(x + y + cxy) y 2 for PY. Suppose that c = 3. (1) Find the best response functions BRx(y) for PX and BRy(x) PY. (2) Draw the best response functions. (3) Find the rationalizable strategies for PX and PY. (4) Find all Nash equilibria.

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