Determine players payoffs in the equilibrium

Assignment Help Business Economics

Reference no: EM131007386

Two individuals, Andy and Beth, work on a joint project. If Andy chooses effort level x ≥ 0 and Beth chooses effort level y ≥ 0, then the total output equals 10x+10y+2xy. Total output is split 50-50 between the two players, so Andy and Beth each receives 5x+ 5y +xy. Andy pays an effort cost equal to x 2 when exerting effort x; Beth pays effort cost y 2 when exerting effort y. Therefore, Andy’s total payoff equals 5x + 5y + xy − x 2 and Beth’s total payoff equals 5x + 5y + xy − y 2 .

a) Maximize each player’s payoff function to find his or her best response function.

b) Find the Nash equilibrium.

c) Determine players’ payoffs in the equilibrium.

d) Is the Nash equilibrium efficient? If not, provide a

Reference no: EM131007386

Questions Cloud

Announced intent to buy large numbers of treasury bonds : The federal government recently announced intent to buy large numbers of Treasury Bonds. Explain how the federal government expects this to improve the economy. Compare this to other companies buying their own stocks. Make a prediction as to the succ..

Explain what is meant by strategic planning : Explain what is meant by strategic planning. How does the SWOT analysis and the "mission statement" fit in the strategic plan?

Economy production function : Given that the US economy production function (to calculate current GDP and potential GDP) is : GDP = Y= F(K,L,N) = 0.04K+0.03L+0.03N. The current GDP is produced with K=200, L=100, and N=100, the full employment GDP (potential GDP) can be potentiall..

Economic game theory problem : Economic game theory problem: please help me. (Cournot Competition with Differentiated Products) Two firms, A and B, are in Cournot (quantity) competition making differentiated products. Each firm has zero fixed cost and a marginal cost of $10.

Determine players payoffs in the equilibrium : Two individuals, Andy and Beth, work on a joint project. If Andy chooses effort level x ≥ 0 and Beth chooses effort level y ≥ 0, then the total output equals 10x+10y+2xy. Maximize each player’s payoff function to find his or her best response functi..

Market structure would act counter-veiling power to cartels : What is the cartel and what prerequisites are required for a cartel to be successful? How do these prerequisites apply to labor unions, OPEC, NCAA, AMA(American Medical Association), and the ABA(American Bar Association)? Do college accredited agenci..

The agreement called for the company to receive payment : Prepare the journal entries on June 30, 2011, to record the interest and necessary adjustments for changes in fair value. Use the extended method demonstrated in Illustration A-2.

The challenge that our economy is going to be facing : The challenge that our economy is going to be facing is that we need to make decisions based on these fluctuations. Do you think our economy does a good job of evaluating these changes in output or not?

Do codes make a difference : Read The Reality Check "Do codes Make a Difference?" on page 165 of your textbook. As you read the article, consider the following questions: How could the topic of this article apply to your personal or professional life, and how could it apply to a..

User Account

All Pages