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Two players simultaneously and independently have to decide how much to contribute to a public good. If player 1 contributes x1 and player 2 con-
Two players simultaneously and independently have to decide how much to contribute to a public good. If player 1 contributes x1 and player 2 con- tributes x2, then the value of the public good is 2(x. + x2 + x1152), which they each receive. Assume that x1 and x2 are positive numbers. Player 1 must pay a cost x? of contributing; thus, player 1's payoff in the game is 141 = 2(x. + x2 + x.x2) x12. Player 2 pays the cost 11% so that player 2's payoff is u2 = 2(x1 + x2 + xlxz) 33.1119. number I is private informa- tion to player 2; player 1 knows that I equals 2 with probability 1/2 and it equals 3 with probability 1/2. Compute the Bayesian Nash equilibrium of this game
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