4. (32 points) Two mushroom hunters (Arslan and Barbara) go mushroom-hunting in the same wood (a common pool resource) a

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4 32 Points Two Mushroom Hunters Arslan And Barbara Go Mushroom Hunting In The Same Wood A Common Pool Resource A 1 (69.3 KiB) Viewed 19 times

4. (32 points) Two mushroom hunters (Arslan and Barbara) go mushroom-hunting in the same wood (a common pool resource) and have the following utility functions, in which y is output (number of mushrooms obtained) and e is effort (time spent mushroom-hunting in the wood per day). Aslan's utility: u^ = y^ (e^)² (1) - Barbara's utility: uB = y³ - (²³)² (2) The number of mushrooms they catch (y) depends on their hunting effort (the number of hours spent mushroom-hunting per day), according to the following production functions: Arslan's catch: y = (1 - eB) e¹ Barbara's catch: y = (1-e^)e (a) Define an external effect (or externality). Explain in your own words why there are externalities in this example.