N residents witness a fire in a building. Each resident can independently choose to help or not. As long as someone helps, the fire is extinguished and every resident gets a benefit of b = 5. However, any resident stopping to help pays a personal cost of c = 4, due to the possible injury. If no resident helps the fires causes damage to the building, and the payoff to all players is 0. That is, if a player decides to help, her payoff is 5-4 = 1; if she does not help and at least one of the other residents helps, her payoff is 5; and, if she does not help and neither do the other residents, her payoff is 0. Solve for the symmetric mixed strategy Nash equilibrium when N = 2. What is the probability that at least one resident stops to help? Hint: The probability that at least one player stops to help is equal to the probability that either of the players stops to help or that both players stop to help. A convenient way of computing this probability is one minus the probability that none of the players stops to help. (a) 0.06 (b) 0.16 (c) 0.2 (d) 0.36

N residents witness a fire in a building. Each resident can independently choose to help or not. As long as someone helps, the fire is extinguished and every resident gets a benefit of b = 5. However, any resident stopping to help pays a personal cost of c = 4, due to the possible injury. If no resident helps the fires causes damage to the building, and the payoff to all players is 0. That is, if a player decides to help, her payoff is 5-4 = 1; if she does not help and at least one of the other residents helps, her payoff is 5; and, if she does not help and neither do the other residents, her payoff is 0. Solve for the symmetric mixed strategy Nash equilibrium when N = 2. What is the probability that at least one resident stops to help? Hint: The probability that at least one player stops to help is equal to the probability that either of the players stops to help or that both players stop to help. A convenient way of computing this probability is one minus the probability that none of the players stops to help. (a) 0.06 (b) 0.16 (c) 0.2 (d) 0.36

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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