Question

Consider a 2-person economy with identical utility functions defined over a private good, x and a public good, g. The utility functions are given by ui = ln xi 2g, i = 1,2. Assume private provisioning of g such that gi is the contribution of individual i and g = g1 + g2. Each individual has a budget given by xi + gi = 100. Posit the free riding problem using the concept of the reaction curve.

Answer 1

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