Answer Happy

Question 2 [15 marks] We consider the following public good provision game. There are 2 players, each choosing the amount of money r, (i € {1,2)) they will give to build a public good. We assume that each player has a maximum of 1 unit of money that he can give, so that , € [0,1] for both players. Once the good is built, they receive a utility h(G) from using it, where G = 1+1₂ is the total amount that was invested in the public good. We assume that h(G) = KVG, where K 20 is a non-negative constant. Each player's utility is therefore 1₂ (1₁,2)= K√√x + 32-₁2€ {1,2}. For each value of K > 0, find all Nash equilibria in pure strategies. (Hint: Separate the cases K € (0, 2), KE (2,2√2] and K 2 2√2)