1
Payoffs
weed
cost
Pi
a
I
Payoff
0
di
1
inandprobabilityofsuccess
effort
put
KI
if P 01gPa
suceeds
suceeds
ECD
le e 1 1 t
Ecu e eslis te l e 1 i
l e l e COCO
ees te ere tea e ez
e te te ez Zee
i enter e er
Expectedutility
Ecu
enter eres
Cgd
ECM
e te
Yet
l
e
o
l
e
ee
Cef
b Nash equilibrium
l es Ce
O l es te
444
5 0.1
wax
e
120
point
5.0 C
Les
Cer
g co
Max point
e
eat
eat
ez
er
Ce
r
ez 1
I
e
I
es
e
ez
I
I C
I C
Ie
Etta
e
l e
I
I
Gt
en
E
it
e
is
the
main
equilibrium
C Social maximisation
ECD ECDTECH
CE CE
2 e ter e er
DECA is maximum
Yet
0
2 Le
when
Ce
Ed
I Eat in
TT
2
Le
ez
2 Lee ee
Ce
2 Le
0
211
e
2212
0
2 c
Cer
2
a
maximum
zip
2
121
2ft
0241
C
212
24212
e 2
er
Cer
Cee
ter
yo
4
4
2C
y
C
ez
e
et
Esten
e
2ft
e
21 7 1
e
E
Hiett
Expected utility
u
e ter
ie
ed
Itf
2e
ie
2
erez
Ele
e
ff
since e ez
2
little
e
e
i
e
E
Fa CHE
2
E
I
By symmetry
Us
er
h
h
e
et
e
Is
E
Fe
it
L
42
f Effort level
payoff
player
because
L
is higher in social welfare maximilation
situation than
This is
because
Nash equilibrium situation
they
only want
to
maximise their
without thinking about the other player
were exerting the same amount
expected
If
of effort
the
as
in the serially optimum account and without
the influence of the beneudont dictator player will eventually
reduce their individual efforts until NE is achieved
they
were
2a
e
utility
Expected
Ya
l er
O
te
EG
e
evil t
ECM e e
e
t e
enest
l er
i ter
e es lil
i
ee
t
t
l e
E
Et E
E i e
b
Yet
0
i
Ya
Ya
fe
Y
I
read
a
Of II
E
E t 92
ECU
ti ee
I
cen
Ca LD to
ey
E
Lest
É
Lei
tf
ee
424 E
Cen
s Oc
c where c
Max Point
2 Co indicating
ee
Ya
Yates
en
er
YI
E
42
o
Ce
eez
a
naff
ke ez 2C t t t l
x
L
It
Lez
k
It
c
x
tf
Ce
Ch
Hey
er
E
t
4th
a
24 I
ez
24
ez 4C 1
I
e
era
e
eiae
z
i
wash
equilibrium
U Tus
D
Y
E
WE
E
Ether
M
d
is maximised when
i
t
o
er
e
er
tee
cen
Jet
Cl
ter
cess
and
Yes
ter
k
kit
CE
Et
Ce
É Y
ye
is
te
Ya
state
ee
o
Yate
cent 42
e
e
Efren
et
ai
Is
e
ter
o
i i
e
maximised
2
e
Nash equilibrium
e
e
e
1
Welfare maximication
et et
21 2
Is
C 2C I
I
Effort level is higher
in benevolent dictatorship
then
Nash equilibrium
f Same as the first question player in NE are acting in
their own self interests and rant to maximise their own
expected pay off
g
NE
situation
at
Welfare
Is
maximisation
2
In both situations
welfare maximization
Hence
Situation 2
1
we can
benevolent
both answer in
is
conclude
greater
that it
have shown that
effortin
than nashequilibrium efforts
is better
for
a socially