Question

Suppose that in order to engage in business firms need permission from a two-level hierarchy of government officials, A and B. However, to receive the permit, they have to bribe the officials. Suppose that the number of firms N who engage in said business is a declining function of the total bribe needed to obtain a permit. That is,

N = 600 - 5(x+y) where x and y are the bribes demanded by A and B respectively.

Question: Find the Nash equilibrium bribes demanded by A and B.

**I have attempted this problem and know that I need to find the Best Response function to find the NE. So, I rearranged for x and y and took the derivative with respect to N but get -1/5 for each which does not make sense to me. I hope you can help me with this question. Thank you so much :)

Answer #1

I really need no calculatin mistakes, especially for the
fourth one. This question is so important to me. Hope somebody
helps me :)
One consumer is choosing to maximize U(X,Y)=XY under a budget
constraint of PxX+PyY=M.
(Px,Py,M)=(4,2,24).
(1) What does formula Px/Py=2 imply?
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(3) Draw an indiscriminate curve that conforms to a given
utility function.
(4) What is the optimal consumption (X*,Y*).
(5) Calculate the income elasticity of demand for X
goods.

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Two consumers (A,B) , two firms with goods x, y. The consumers
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*What I have so far
U=X^2Y MRS^A=2Y^A/X^A=P^X/P^Y
U=XY^2 MRS^B=Y^A/2X^A=P^X/P^Y
X=K^1/3*L^2/3 mrts=2K^X/L^X=w/r
3*K^1/3*L^1/3 mrts=2K^Y/L^Y=w/r
r=1, find: the competitive general equilibrium p^x,p^y,w,
Equilibrium quantities demanded of x and y for both consumers,
the equilibrium production function inputs

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