33 (b) (c) (d) (e) functions. negative them. Find the best response function of each partner. Draw the best response Solve for the Nash equilibrium of this game. 1 Now assume that b = -. (This implies that the effort levels have synergies.) Solve for the best response functions in this case and draw Solve for the Nash equilibrium of this game. Now suppose that the partners can write a contract on effort levels. That is, they can determine the effort levels which would maximize the firm's revenue net of total effort costs. Briefly explain whether you would expect the effort levels they choose to specify in the contract to be higher or lower than the effort levels you found in parts (b) and (d).

33 (b) (c) (d) (e) functions. negative them. Find the best response function of each partner. Draw the best response Solve for the Nash equilibrium of this game. 1 Now assume that b = -. (This implies that the effort levels have synergies.) Solve for the best response functions in this case and draw Solve for the Nash equilibrium of this game. Now suppose that the partners can write a contract on effort levels. That is, they can determine the effort levels which would maximize the firm's revenue net of total effort costs. Briefly explain whether you would expect the effort levels they choose to specify in the contract to be higher or lower than the effort levels you found in parts (b) and (d).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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