Question

Question 1 Recall our discussion about freeriding behavior. Consider the following game: It is u season, and two roommates must decide on whether or not to get u shot, which costs K dollars. Let S (for example, S = 10, etc.) represent the benet of not getting sick. That is, if a player gets sick, they incur a cost −S of getting sick, and if they don't, they receive a benet of S. Now, if neither roommate pays for the shot, they both get sick. If Roommate 1 buys the shot but Roomate 2 does not, Roomate 1 does not get sick. However, neither does Roommate 2, because Roomate 1 obtained the shot. The opposite scenario is true of Roomate 2 buys the shot but Roomate 2 does not. Finally, both have the option of buying the shot and not getting sick. Suppose that S − K > 0, and answer the following questions: 1. Write the game in a payo table/matrix. 2. Write each player's best response function. 3. Solve for the Nash equilibria. 4. Describe the situation in words and comment on the possible implications of the Nash equilibria in this game.

Answer 1