Find all of the other nash equilibria

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Heather and David (players 1 and 2) are partners in a handmade postcard business. They each put costly effort into the business, which then determines their profits.

However, unless they each exert at least 1 unit of effort, there are no revenues at all. In particular, each player i chooses an effort level ei Ú 0. Player i's payoff is

363_Figure 8.jpg

where j denotes the other player.

(a) Prove that (0,0) is a Nash equilibrium.

(b) Graph the players' best responses as a function of each other's strategies.

(c) Find all of the other Nash equilibria.

Reference no: EM131252276

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