Question

Anna and Bess are assigned to write a joint paper within a 24-hour period about the Pareto optimal provision of public goods. Let tA denote the number of hours that Anna contributes to the project and tB the number of hours that Bess contributes. The numeric grade that Anna and Bess earn is a function, 23 ln (tA+ tB), of the total number of hours that they contribute to the project. If Anna contributes tA, then she has (24 — tA) hours in the day for leisure. Anna’s utility function is Ua = 23 ln (tA+ tB) +ln (24 — tA), and Bess’ utility function is Ub= 23 ln (tA+ tB) + ln (24 — tB). If they choose the hours to contribute simultaneously and independently, what is the Nash equilibrium number of hours that each will provide? What is the number of hours each should contribute to the project that maximizes the sum of their utilities? C

Answer 1