Essay
Pogs can be made in one- person firms or in two- person partnerships. In a one- person firm the production technology is yi = ei, but in a two- person firm the technology is Y = Be1e2. All pog makers have the utility function ui = yi - ei3/12. Output is shared equally in partnership.
i)Calculate the optimal effort and the corresponding utility for a one- person firm.
ii)What are the Nash equilibrium effort levels for a partnership? What is the resulting utility level for a typical person?
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i)ei = 2, ui =...View Answer
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