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Net benefit as a function of the player investment

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Reference no: EM133083228

Suppose that 20 risk neutral competitors participate in a rent seeking game with a fixed prize of $500. Each player may invest as much money as he wishes in the political contest. The probability of winning is directly proportional to the candidate's share of the total rent-seeking investment.

1. What is the expected net benefit of a player if all other players invest $20 each? Write the net benefit as a function of the player's investment.

2. Solve the maximization problem to arrive at the profit-maximizing investment. Round to the nearest cent.

Reference no: EM133083228

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