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Consider a variant of the Commons Game with a first stage in which shepherd 1 chooses to fertilize the Green or not. Fertilizing involves a fixed cost to shepherd 1, denoted K. If 1 fertilizes the

Consider a variant of the Commons Game with a first stage in which shepherd 1 chooses to fertilize the Green or not. Fertilizing involves a fixed cost to shepherd 1, denoted K. If 1 fertilizes the Green, the resulting value per sheep is the usual one, 120 - q1 - q2. If 1 does not fertilize, the value per sheep falls to 60 - q1 - q2. Player 1's choice of whether or not to fertilize is observed by both shepherds, and then the game proceeds to a second stage in which they engage in the simultaneous choice of the number of sheep each grazes. Solve for the subgame perfect equilibrium of this game. Discuss how your answer varies with K.

Apr 16 2021 View more View Less

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