Pogs can be made in one- person firms or in two- person partnerships. In a one- person firm the production technology is yi = ei, but in a two- person firm the technology is Y = Be₁e₂. All pog makers have the utility function u_i= y_i- e_i³/12. Output is shared equally in partnership.
i)Calculate the optimal effort and the corresponding utility for a one- person firm.
ii)What are the Nash equilibrium effort levels for a partnership? What is the resulting utility level for a typical person?

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The Answer of Pogs can be made in one- person firms or in two- person partnerships. In a one- person firm the production technology is yi = ei, but in a two- person firm the technology is Y = Be₁e₂. All pog makers have the utility function u_i= y_i- e_i³/12. Output is shared equally in partnership. i)Calculate the optimal effort and the corresponding utility for a one- person firm. ii)What are the Nash equilibrium effort levels for a partnership? What is the resulting utility level for a typical person?

Pogs Can Be Made in One- Person Firms or in Two-