3. You and a fellow student are working on a joint project in a course. You each know that your project's score in points will be split between the two of you. The project's score depends on the level of effort you put into the project, where your effort, ee [0,1], ranges between zero and one. Putting forth effort is costly to you, though: you feel a cost of effort given by c(e). Your partner faces the same cost function for her own effort. a. Suppose the score earned by the project is given by flee₂)=200 eje₂, and your cost of effort is given by c(e)=40e, . What is the effort chosen by you and your partner, and what is your score on the project? (Hint: You need to use best-response graphs on this one. The first-order conditions in this problem will only help you draw the best-response function of each player. Find the Nash equilibria by finding the intersections of the best-response functions.) b. Now suppose the score earned on the project is given by f(e1,e₂)=200 ejes and the cost of your effort is given by c(e.)=150(e)². What is the effort chosen by you and your partner, and what is your score on the project? (The hint on Part A still applies here.)

3. You and a fellow student are working on a joint project in a course. You each know that your project's score in points will be split between the two of you. The project's score depends on the level of effort you put into the project, where your effort, ee [0,1], ranges between zero and one. Putting forth effort is costly to you, though: you feel a cost of effort given by c(e). Your partner faces the same cost function for her own effort. a. Suppose the score earned by the project is given by flee₂)=200 eje₂, and your cost of effort is given by c(e)=40e, . What is the effort chosen by you and your partner, and what is your score on the project? (Hint: You need to use best-response graphs on this one. The first-order conditions in this problem will only help you draw the best-response function of each player. Find the Nash equilibria by finding the intersections of the best-response functions.) b. Now suppose the score earned on the project is given by f(e1,e₂)=200 ejes and the cost of your effort is given by c(e.)=150(e)². What is the effort chosen by you and your partner, and what is your score on the project? (The hint on Part A still applies here.)

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter7: Economies Of Scale And Scope

Section: Chapter Questions

Problem 7.5IP

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Do not use excel on solution.