Consider the voluntary contribution to building a fence game

Consider the voluntary contribution to building a fence game discussed in class. Assume that v1 = v2=100 and C=150, and select all that apply. a. There are Nash equilibria in which the fence is not built. b. Each player donating 100 is a pure strategy Nash equilibrium in the game. c. It is efficient to build the fence. d. Contributing more than her own valuation is a strictly dominated strategy for each player.

Solution

The correct answers are -

c. It is efficient to build the fence

d. Contributing more than her own valuation is a strictly dominated strategy for each player

A. There are Nash equilibria in which the fence is not built.

Reason

c>Since the overall cost of the fence-making is lesser than the total values, so it is efficient to make the fence.

d> One can always have at least value 0 by not paying, so paying more than his own value does not make sense.

a> When one player pays nothing, the best strategy for the other player is also to not pay anything.