Economics 431 Fall nd midterm Answer Key


 Willa James
 3 years ago
 Views:
Transcription
1 Economics 431 Fall nd midterm Answer Key 1) (20 oints) Big C cable comany has a local monooly in cable TV (good 1) and fast Internet (good 2). Assume that the marginal cost of roducing either good is zero. There are three customers, A, B and C with different reservation rices for the two goods. Consumer utility from a roduct equals their reservation rice minus the rice of the roduct. Consumers do not buy unless they get ositive utility. The reservation rices are as follows Customer Reservation rice for good 1 Reservation rice for good 2 A 2 5 B 4 4 C 6 2 a) (7 oints) Suose the goods are offered searately. Comute the monooly rices for good 1 and good 2. Good 1: Price Quantity Profit , Good 2: Price Quantity Profit Monooly rices (4, 4). b) (5 oints) Now assume that both goods are offered only as a bundle, but not searately. Comute the rofitmaximizing bundle rice. Good 1: Price Quantity Profit The bundle is offered for rice 7 c) (8 oints) Let the two goods be offered searately at rices you have found in a), andalso as a bundle at rice you have found in b). Determine which customers buys only individual goods or both as a bundle. Determine the monoolist s rofit. What is the most rofitable way to bundle the goods? Customer Utility from bundle Utility from good 1 Utility from good 2 Decision A buy good 2 B buy bundle C buy good 1 1
2 Profit: 4+4+7=15 Pure bundling is the most rofitable. 2) (15 oints) A local market for milk is served by several farms. Assume that you can use Cournot model with linear demand and constant marginal costs that may differ across farms to describe how this market oerates. The rice of milk is $2.50 agallon. FarmA has marginal cost of $1.50 er gallon, has a 25% marketshareandmakesarofit of$1000 er day. a) (8 oints) Farm B has a 20% share of this market. Calculate its marginal cost c i = s i η c B = s B c A s A 2.50 c = c =0.8, c =1.70 b) (7 oints) Calculate the rofitoffarmb (Hint: can the ratio of rofits be exressed through market shares?) c i = Bq i π i =( c i ) q i = Bq 2 i π B π A = Bq2 B Bq 2 A = s2 B s 2 A π B =$640er day. 3) (15 oints) Assume that consumer tastes for soft drinks can be described by a location model of roduct differentiation. Let manufacturers have identical marginal costs and set drink rices strategically to maximize rofits. a) (10 oints) Consider three drinks: Coke, Srite (both made by Coca Cola Comany) and Uncle Al s Lemon Mixer. Suose that consumers erceive Coke and Srite as different roducts, but cannot tell the difference between Srite and Uncle Al s Lemon Mixer. Restaurant A serves only Coke and Srite. Restaurant B serves only Coke and Uncle Al s Lemon Mixer. Restaurant C serves only Srite and Uncle Al s Lemon Mixer. All three restaurants have consumers with identical distribution of tastes and willingness to ay. Which drinks at which restaurants will be riced above their marginal cost? Which restaurant will have a higher rice for Coke and why? Drinks at A and B will be riced above marginal cost, drinks at C will be riced at marginal cost. Satial Bertrand vs. Bertrand. Restaurant A will have a higher rice for Coke, because Coca Cola is a monoolist in restaurant A. 2
3 b) (5 oints) Using your results in art a), exlain why we observe that restaurants serving Coke do not serve Pesi, and vice versa. If consumers make little difference between Coke and Pesi, and they are both offered at the same restaurant, they will have to be riced close to marginal cost, and rofit islow. Beinga monoolist in some locations is more rofitable than being a Bertrand duoolist in all locations. 3
4 4) (35 oints) Consider a game between two airlines. Players simultaneously choose whether to set a high rice or a low rice for the tickets. The ayoffs are given by the following matrix L H L 1, 1 6, 0 H 0, 6 5, 5 a) (10 oints) Find all the Nash equilibria of this game. Are equilibrium ayoff allocations Pareto otimal? Suose the game above is reeated a finite number of times. Is there a subgameerfect equilibrium strategy that can lead to Pareto otimal ayoffs at least in some rounds of the game? Exlain. The unique Nash equilibrium is (L, L). It is not Pareto otimal: the allocation that Pareto dominates (1, 1) is (5, 5). By Selten s theorem, all subgame erfect equilibria of the reeated game have layers choose (L, L) action rofile in every round. Therefore, none of the Pareto otimal ayoff allocations (0, 6), (6, 0) or (5, 5) can be realized in any of the rounds. b) (10 oints) Suose instead that both airlines can choose among three rices {L, M, H}. The ayoff matrix for the new game is L M H L 1, 1 2, 0 6, 0 M 0, 2 3, 3 2, 0 H 0, 6 0, 2 5, 5 Find all the Nash equilibria of this stage game. Suose that the stage game is reeated twice, and the ayoff in the second eriod is discounted by δ<1. Find the range of δ for which the following strategy rofile is a subgame erfect equilibrium. Player 1 lays H in the first eriod. If the outcome of the first eriod is (H, H), thenhelaysm in the second eriod, otherwise he lays L in the second eriod. Player 2 has the same strategy. The stage game has two Nash equilibria (M,M) and (L, L). In the second eriod, the strategy tells the layers to choose a Nash equilibrium action after every history, therefore, both layers lay their best resonse in any subgame that leads to the second eriod. In the first eriod, a layer can have a otential deviation to L instead of H. For this deviation to be unrofitable, we must have 5+3 δ>6+1 δ δ> 1 2 c) (15 oints) Now suose that the game in art b) is reeated three times. Write down the comlete descrition of the strategies (that tell what action to take initially and after every ossible history) that can sustain the outcome (H, H) in the firsttwoeriodsasasubgameerfect equilibrium. Find the range of δ for which the strategy rofile you described is a subgame erfect equilibrium. 4
5 Player 1. Play H in the first eriod. In subsequent eriods, lay M if the history has only (H, H) in the ast. For all other histories, lay L in the current eriod. If the history in the first eriod is (H, H), fromthenonthegameisidenticaltothatofartb). The strategy rofile is an equilibrium in this subgame for δ> 1. For any other history after the 2 first eriod, the strategy rescribes to lay a Nash equilibrium of the stage game, therefore, both layers lay their best resonse in any subsequent subgame. In the first eriod, a layer can also have a otential deviation to L instead of H. However,ifit is unrofitable to deviate in the second eriod, it must also be unrofitable to deviate in the first eriod, because the unishment for the same deviation is then two eriods long. 5) (20 oints) Consider the following sequential game of entry deterrence on a market with linear demand given by =9 Q The incumbent (firm 1) first chooses whether or not to invest in new technology. The investment costs K. If the incumbent invests, his marginal cost is c L =1, and if he does not invest, it is c H =6. Then the incumbent and the entrant (firm 2), whose marginal cost is c H =6lay a Cournot quantity game. The rofit functions are ½ (A cl B (q π 1 = 1 + q 2 )) q 1 K if invests (A c H B (q 1 + q 2 )) q 1 if does not invest π 2 =(A c B (q 1 + q 2 )) q 2 a) (10 oints) Show that if the incumbent invests, the Nash equilibrium of the subsequent Cournot game has the entrant roduce zero. How much does the incumbent roduce if the entrant roduces zero? (Hint: will the entrant be better off roducing zero if making q 2 > 0 dros the rice below his marginal cost?) If the entrant roduces zero, the incumbent s best resonse is to roduce monooly outut that corresonds to his marginal cost c L q M = A c L 2B =4 If at this outut level the market rice is below c H, = A + c L =5< 6=c H, 2 then the entrant will have a negative rofit fromanyq 2 > 0. Therefore, entrant chooses to roduce zero as a best resonse. The strategies that are best resonses to each other constitute a Nash equilibrium. b) (10 oints) What are the equilibrium rofits of the two firms if the incumbent does not invest? Find all values of K for which the incumbent will choose to invest in new technology. If the incumbent does not invest, both firmshaveequalmarginalcostsc H,andtheyeachget π 1 = π 2 = 1 (A c H ) 2 =1 9 B 5
6 If the incumbent invests, he gets 1 (A c L ) 2 K =16 K 4 B The incumbent invests if 16 K>1, i.e. K<15. 6
7 Reference Guide Cournot Oligooly with linear demand Elasticity = A BQ η = dq d Q = 1 B Q. Firm i chooses q i to maximize its rofit given the oututs of all other firms: max (A c i BQ i Bq i ) q i q i In equilibrium, each firm s outut must satisfy the condition for rofit maximization: A c i BQ i 2Bq i =0 or or where s i is market share of firm i. c i = Bq i c i = s i η, 7
A Simple Model of Pricing, Markups and Market. Power Under Demand Fluctuations
A Simle Model of Pricing, Markus and Market Power Under Demand Fluctuations Stanley S. Reynolds Deartment of Economics; University of Arizona; Tucson, AZ 85721 Bart J. Wilson Economic Science Laboratory;
More informationc 2009 Je rey A. Miron 3. Examples: Linear Demand Curves and Monopoly
Lecture 0: Monooly. c 009 Je rey A. Miron Outline. Introduction. Maximizing Pro ts. Examles: Linear Demand Curves and Monooly. The Ine ciency of Monooly. The Deadweight Loss of Monooly. Price Discrimination.
More informationChapter 9 Profit Maximization
Chater 9 Profit Maximization Economic theory normally uses the rofit maximization assumtion in studying the firm just as it uses the utility maximization assumtion for the individual consumer. This aroach
More informationMonopoly. Monopoly. Causes of Monopolies. Profit Maximization. ECON 370: Microeconomic Theory. Summer 2004 Rice University Stanley Gilbert
Monool market with a single seller Monool ECON 370: Microeconomic Theor Firm demand = market demand Firm demand is downward sloing Monoolist can alter market rice b adjusting its own outut level Summer
More informationPrice Elasticity of Demand MATH 104 and MATH 184 Mark Mac Lean (with assistance from Patrick Chan) 2011W
Price Elasticity of Demand MATH 104 and MATH 184 Mark Mac Lean (with assistance from Patrick Chan) 2011W The rice elasticity of demand (which is often shortened to demand elasticity) is defined to be the
More information2. Suppose two Cournot duopolist rms operate at zero marginal cost. The market demand is p = a bq. Firm 1 s bestresponse function is
Econ301 (summer 2007) Quiz 1 Date: Jul 5 07 Instructor: Helen Yang PART I: Multiple Choice (5 points each, 75 points in total) 1. In the long run, a monopolistically competitive rm (a) operates at full
More informationOn Software Piracy when Piracy is Costly
Deartment of Economics Working aer No. 0309 htt://nt.fas.nus.edu.sg/ecs/ub/w/w0309.df n Software iracy when iracy is Costly Sougata oddar August 003 Abstract: The ervasiveness of the illegal coying of
More informationGame Theory: Supermodular Games 1
Game Theory: Supermodular Games 1 Christoph Schottmüller 1 License: CC Attribution ShareAlike 4.0 1 / 22 Outline 1 Introduction 2 Model 3 Revision questions and exercises 2 / 22 Motivation I several solution
More informationMonopoly vs. Compe22on. Theory of the Firm. Causes of Monopoly. Monopoly vs. Compe22on. Monopolis2c Markets P. Natural. Legal.
Monooly vs. Comeon Monooly Perfect Come,,on Theory of the Firm P Monooly s demand = Market demand (ΔQ P) P Firm s demand = Horizontal line ( Δ P does not change) Monoolisc Markets P d Q Monooly vs. Comeon
More informationOligopoly: Cournot/Bertrand/Stackelberg
Outline Alternative Market Models Wirtschaftswissenschaften Humboldt Universität zu Berlin March 5, 2006 Outline 1 Introduction Introduction Alternative Market Models 2 Game, Reaction Functions, Solution
More informationLecture 4: Nash equilibrium in economics: monopolies and duopolies
Lecture : Nash equilibrium in economics: monopolies and duopolies We discuss here an application of Nash equilibrium in economics, the Cournot s duopoly model. This is a very classical problem which in
More informationFin 3710 Investment Analysis Professor Rui Yao CHAPTER 6: EFFICIENT DIVERSIFICATION
HW 4 Fin 3710 Investment Analysis Professor Rui Yao CHAPTER 6: EFFICIENT DIVERIFICATION 1. E(r P ) = (0.5 15) + (0.4 10) + (0.10 6) = 1.1% 3. a. The mean return should be equal to the value comuted in
More informationA COMPARISON OF PERFECT COMPETITION, MONOPOLISTIC COMPETITION, MONOPOLY, & OLIGOPOLY
A COMARISON OF ERFECT COMETITION, MONOOLISTIC COMETITION, MONOOLY, & OLIGOOLY Type of Number of Type of Market Sellers roduct rice SR profit LR rofit      
More informationPrice Discrimination in the Digital Economy*
Price Discrimination in the Digital Economy Drew Fudenberg (Harvard University) J. Miguel VillasBoas (University of California, Berkeley) May 2012 ABSTRACT With the develoments in information technology
More informationWhat is Adverse Selection. Economics of Information and Contracts Adverse Selection. Lemons Problem. Lemons Problem
What is Adverse Selection Economics of Information and Contracts Adverse Selection Levent Koçkesen Koç University In markets with erfect information all rofitable trades (those in which the value to the
More informationWeek 7  Game Theory and Industrial Organisation
Week 7  Game Theory and Industrial Organisation The Cournot and Bertrand models are the two basic templates for models of oligopoly; industry structures with a small number of firms. There are a number
More informationPricing the Internet. Outline. The Size of the Internet (Cont.) The Size of the Internet
Pricing the Internet Costas Courcoubetis thens University of Economics and Business and ICSFORTH Outline The growth of the internet The role of ricing Some ricing roosals Pricing in a cometitive framework
More informationLarge firms and heterogeneity: the structure of trade and industry under oligopoly
Large firms and heterogeneity: the structure of trade and industry under oligooly Eddy Bekkers University of Linz Joseh Francois University of Linz & CEPR (London) ABSTRACT: We develo a model of trade
More informationJoint Production and Financing Decisions: Modeling and Analysis
Joint Production and Financing Decisions: Modeling and Analysis Xiaodong Xu John R. Birge Deartment of Industrial Engineering and Management Sciences, Northwestern University, Evanston, Illinois 60208,
More information12 Monopolistic Competition and Oligopoly
12 Monopolistic Competition and Oligopoly Read Pindyck and Rubinfeld (2012), Chapter 12 09/04/2015 CHAPTER 12 OUTLINE 12.1 Monopolistic Competition 12.2 Oligopoly 12.3 Price Competition 12.4 Competition
More informationReDispatch Approach for Congestion Relief in Deregulated Power Systems
ReDisatch Aroach for Congestion Relief in Deregulated ower Systems Ch. Naga Raja Kumari #1, M. Anitha 2 #1, 2 Assistant rofessor, Det. of Electrical Engineering RVR & JC College of Engineering, Guntur522019,
More informationOligopoly and Strategic Pricing
R.E.Marks 1998 Oligopoly 1 R.E.Marks 1998 Oligopoly Oligopoly and Strategic Pricing In this section we consider how firms compete when there are few sellers an oligopolistic market (from the Greek). Small
More informationCOMMERCE MENTORSHIP PROGRAM COMM295: MANAGERIAL ECONOMICS FINAL EXAM REVIEW SOLUTION KEY
COMMERCE MENTORSHIP PROGRAM COMM295: MANAGERIAL ECONOMICS FINAL EXAM REVIEW SOLUTION KEY WR1 SamIAm is a local restaurant chain located in Vancouver. It is considering different pricing strategies for
More informationEconomics 431 Fall 2003 1st midterm Answer Key
Economics 431 Fall 003 1st midterm Answer Key 1) (7 points) Consider an industry that consists of a large number of identical firms. In the long run competitive equilibrium, a firm s marginal cost must
More informationEconomics 203: Intermediate Microeconomics I Lab Exercise #11. Buy Building Lease F1 = 500 F1 = 750 Firm 2 F2 = 500 F2 = 400
Page 1 March 19, 2012 Section 1: Test Your Understanding Economics 203: Intermediate Microeconomics I Lab Exercise #11 The following payoff matrix represents the longrun payoffs for two duopolists faced
More informationPiracy and Network Externality An Analysis for the Monopolized Software Industry
Piracy and Network Externality An Analysis for the Monoolized Software Industry Ming Chung Chang Deartment of Economics and Graduate Institute of Industrial Economics mcchang@mgt.ncu.edu.tw Chiu Fen Lin
More informationExercises for Industrial Organization Master de Economía Industrial 20122013. Matilde Pinto Machado
Exercises for Industrial Organization Master de Economía Industrial 20122013 Matilde Pinto Machado September 11, 2012 1 Concentration Measures 1. Imagine two industries A and B with concentration curves
More informationPrice competition with homogenous products: The Bertrand duopoly model [Simultaneous move price setting duopoly]
ECON9 (Spring 0) & 350 (Tutorial ) Chapter Monopolistic Competition and Oligopoly (Part ) Price competition with homogenous products: The Bertrand duopoly model [Simultaneous move price setting duopoly]
More informationDo not open this exam until told to do so.
Do not open this exam until told to do so. Department of Economics College of Social and Applied Human Sciences K. Annen, Winter 004 Final (Version ): Intermediate Microeconomics (ECON30) Solutions Final
More informationwhere a, b, c, and d are constants with a 0, and x is measured in radians. (π radians =
Introduction to Modeling 3.61 3.6 Sine and Cosine Functions The general form of a sine or cosine function is given by: f (x) = asin (bx + c) + d and f(x) = acos(bx + c) + d where a, b, c, and d are constants
More informationHomework 3, Solutions Managerial Economics: Eco 685
Homework 3, Solutions Managerial Economics: Eco 685 Question 1 a. Second degree since we have a quantity discount. For 2 GB the cost is $15 per GB, for 5 GB the cost is $10 per GB, and for 10 GB the cost
More informationI will make some additional remarks to my lecture on Monday. I think the main
Jon Vislie; august 04 Hand out EON 4335 Economics of Banking Sulement to the the lecture on the Diamond Dybvig model I will make some additional remarks to my lecture on onday. I think the main results
More informationEECS 122: Introduction to Communication Networks Homework 3 Solutions
EECS 22: Introduction to Communication Networks Homework 3 Solutions Solution. a) We find out that onelayer subnetting does not work: indeed, 3 deartments need 5000 host addresses, so we need 3 bits (2
More informationNew Technology and Profits
Another useful comparative statics exercise is to determine how much a firm would pay to reduce its marginal costs to that of its competitor. This will simply be the difference between its profits with
More informationOligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry s output.
Topic 8 Chapter 13 Oligopoly and Monopolistic Competition Econ 203 Topic 8 page 1 Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry
More informationWorking paper No: 23/2011 May 2011 LSE Health. Sotiris Vandoros, Katherine Grace Carman. Demand and Pricing of Preventative Health Care
Working aer o: 3/0 May 0 LSE Health Sotiris Vandoros, Katherine Grace Carman Demand and Pricing of Preventative Health Care Demand and Pricing of Preventative Healthcare Sotiris Vandoros, Katherine Grace
More informationComparisons of Industry Market Structures. Imperfect Competition Market Structure Models (11/10/09)
Imperfect Market Structure Models (11/10/09) Today: and Monopsony/Oligopsony Thursday: Market Structure, Conduct and erformance Model Exam III 24 th Characteristics Comparisons of Industry Market Structures
More informationRisk and Return. Sample chapter. e r t u i o p a s d f CHAPTER CONTENTS LEARNING OBJECTIVES. Chapter 7
Chater 7 Risk and Return LEARNING OBJECTIVES After studying this chater you should be able to: e r t u i o a s d f understand how return and risk are defined and measured understand the concet of risk
More informationTHE WELFARE IMPLICATIONS OF COSTLY MONITORING IN THE CREDIT MARKET: A NOTE
The Economic Journal, 110 (Aril ), 576±580.. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK and 50 Main Street, Malden, MA 02148, USA. THE WELFARE IMPLICATIONS OF COSTLY MONITORING
More informationAn important observation in supply chain management, known as the bullwhip effect,
Quantifying the Bullwhi Effect in a Simle Suly Chain: The Imact of Forecasting, Lead Times, and Information Frank Chen Zvi Drezner Jennifer K. Ryan David SimchiLevi Decision Sciences Deartment, National
More informationMicroeconomics. Lecture Outline. Claudia Vogel. Winter Term 2009/2010. Part III Market Structure and Competitive Strategy
Microeconomics Claudia Vogel EUV Winter Term 2009/2010 Claudia Vogel (EUV) Microeconomics Winter Term 2009/2010 1 / 25 Lecture Outline Part III Market Structure and Competitive Strategy 12 Monopolistic
More information5 Market Games For Teaching Economics
5 Market Games For Teaching Economics Progression 5 Market Games from website economicsgames.com To be played separately or as a sequence: Market Game 1: Sunk costs, monopoly, and introduction to the
More informationCompetition between Apple and Samsung in the smartphone market introduction into some key concepts in managerial economics
Competition between Apple and Samsung in the smartphone market introduction into some key concepts in managerial economics Dr. Markus Thomas Münter Collège des Ingénieurs Stuttgart, June, 03 SNORKELING
More information6.042/18.062J Mathematics for Computer Science December 12, 2006 Tom Leighton and Ronitt Rubinfeld. Random Walks
6.042/8.062J Mathematics for Comuter Science December 2, 2006 Tom Leighton and Ronitt Rubinfeld Lecture Notes Random Walks Gambler s Ruin Today we re going to talk about onedimensional random walks. In
More informationOligopoly. Chapter 25
Chapter 25 Oligopoly We have thus far covered two extreme market structures perfect competition where a large number of small firms produce identical products, and monopoly where a single firm is isolated
More informationChapter Three. Topics To Be Covered
Chater Three Alying the SulyandDemand Model Toics To Be Covered How the shaes of demand and suly curves matter? Sensitivity of quantity demanded to rice. Sensitivity of quantity sulied to rice. Long run
More informationIEEM 101: Inventory control
IEEM 101: Inventory control Outline of this series of lectures: 1. Definition of inventory. Examles of where inventory can imrove things in a system 3. Deterministic Inventory Models 3.1. Continuous review:
More informationA 60,000 DIGIT PRIME NUMBER OF THE FORM x 2 + x Introduction StarkHeegner Theorem. Let d > 0 be a squarefree integer then Q( d) has
A 60,000 DIGIT PRIME NUMBER OF THE FORM x + x + 4. Introduction.. Euler s olynomial. Euler observed that f(x) = x + x + 4 takes on rime values for 0 x 39. Even after this oint f(x) takes on a high frequency
More informationCBus Voltage Calculation
D E S I G N E R N O T E S CBus Voltage Calculation Designer note number: 3121256 Designer: Darren Snodgrass Contact Person: Darren Snodgrass Aroved: Date: Synosis: The guidelines used by installers
More informationCournot s model of oligopoly
Cournot s model of oligopoly Single good produced by n firms Cost to firm i of producing q i units: C i (q i ), where C i is nonnegative and increasing If firms total output is Q then market price is P(Q),
More informationMikroekonomia B by Mikolaj Czajkowski. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Mikroekonomia B by Mikolaj Czajkowski Test 12  Oligopoly Name Group MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The market structure in which
More informationUNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION
UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION San Diego Gas & Electric Comany, ) EL0095075 Comlainant, ) ) v. ) ) ) Sellers of Energy and Ancillary Services ) Docket Nos. Into Markets
More informationThe vertical differentiation model in the insurance market: costs structure and equilibria analysis
The vertical differentiation model in the insurance market: costs structure and equilibria analysis Denis V. Kuzyutin 1, Maria V. Nikitina, Nadezhda V. Smirnova and Ludmila N. Razgulyaeva 1 St.Petersburg
More informationMonopoly. Key differences between a Monopoly and Perfect Competition Perfect Competition
Monopoly Monopoly is a market structure in which one form makes up the entire supply side of the market. That is, it is the polar opposite to erfect Competition we discussed earlier. How do they come about?
More informationCompetition and Regulation. Lecture 2: Background on imperfect competition
Competition and Regulation Lecture 2: Background on imperfect competition Monopoly A monopolist maximizes its profits, choosing simultaneously quantity and prices, taking the Demand as a contraint; The
More informationThe Basics of Game Theory
Sloan School of Management 15.010/15.011 Massachusetts Institute of Technology RECITATION NOTES #7 The Basics of Game Theory Friday  November 5, 2004 OUTLINE OF TODAY S RECITATION 1. Game theory definitions:
More informationchapter: Solution Oligopoly 1. The accompanying table presents market share data for the U.S. breakfast cereal market
S209S220_Krugman2e_PS_Ch15.qxp 9/16/08 9:23 PM Page S209 Oligopoly chapter: 15 1. The accompanying table presents market share data for the U.S. breakfast cereal market in 2006. Company a. Use the data
More information9 Repeated Games. Tomorrow, and tomorrow, and tomorrow, Creeps in this petty pace from day to day To the last syllable of recorded time Shakespeare
9 Repeated Games Tomorrow, and tomorrow, and tomorrow, Creeps in this petty pace from day to day To the last syllable of recorded time Shakespeare When a game G is repeated an indefinite number of times
More informationhttp://www.ualberta.ca/~mlipsett/engm541/engm541.htm
ENGM 670 & MECE 758 Modeling and Simulation of Engineering Systems (Advanced Toics) Winter 011 Lecture 9: Extra Material M.G. Lisett University of Alberta htt://www.ualberta.ca/~mlisett/engm541/engm541.htm
More information9.1 Cournot and Bertrand Models with Homogeneous Products
1 Chapter 9 Quantity vs. Price Competition in Static Oligopoly Models We have seen how price and output are determined in perfectly competitive and monopoly markets. Most markets are oligopolistic, however,
More informationMachine Learning with Operational Costs
Journal of Machine Learning Research 14 (2013) 19892028 Submitted 12/11; Revised 8/12; Published 7/13 Machine Learning with Oerational Costs Theja Tulabandhula Deartment of Electrical Engineering and
More informationAGEC 105 Spring 2016 Homework 7. 1. Consider a monopolist that faces the demand curve given in the following table.
AGEC 105 Spring 2016 Homework 7 1. Consider a monopolist that faces the demand curve given in the following table. a. Fill in the table by calculating total revenue and marginal revenue at each price.
More informationHomework 4 Managerial Economics MBA, NCCU
Homework 4 Managerial Economics MBA, NCCU 1.Referring to the following figure, suppose that Mercury Airlines marginal revenue and demand curves cross the marginal cost curve at quantities of 3,000 and
More informationECON 312: Oligopolisitic Competition 1. Industrial Organization Oligopolistic Competition
ECON 312: Oligopolisitic Competition 1 Industrial Organization Oligopolistic Competition Both the monopoly and the perfectly competitive market structure has in common is that neither has to concern itself
More informationHow to Solve Strategic Games? Dominant Strategies
How to Solve Strategic Games? There are three main concepts to solve strategic games: 1. Dominant Strategies & Dominant Strategy Equilibrium 2. Dominated Strategies & Iterative Elimination of Dominated
More informationCompensating Fund Managers for RiskAdjusted Performance
Comensating Fund Managers for RiskAdjusted Performance Thomas S. Coleman Æquilibrium Investments, Ltd. Laurence B. Siegel The Ford Foundation Journal of Alternative Investments Winter 1999 In contrast
More informationTworesource stochastic capacity planning employing a Bayesian methodology
Journal of the Oerational Research Society (23) 54, 1198 128 r 23 Oerational Research Society Ltd. All rights reserved. 165682/3 $25. www.algravejournals.com/jors Tworesource stochastic caacity lanning
More informationUnit 3. Elasticity Learning objectives Questions for revision: 3.1. Price elasticity of demand
Unit 3. Elasticity Learning objectives To comrehen an aly the concets of elasticity, incluing calculating: rice elasticity of eman; crossrice elasticity of eman; income elasticity of eman; rice elasticity
More informationL10. Chapter 13 Oligopoly: Firms in Less Competitive Markets
L10 Chapter 13 Oligopoly: Firms in Less Competitive Markets The Four Types of Market Structure Number of Firms? Many firms One firm Few firms Differentiated products Type of Products? Identical products
More informationIndex Numbers OPTIONAL  II Mathematics for Commerce, Economics and Business INDEX NUMBERS
Index Numbers OPTIONAL  II 38 INDEX NUMBERS Of the imortant statistical devices and techniques, Index Numbers have today become one of the most widely used for judging the ulse of economy, although in
More information6.254 : Game Theory with Engineering Applications Lecture 2: Strategic Form Games
6.254 : Game Theory with Engineering Applications Lecture 2: Strategic Form Games Asu Ozdaglar MIT February 4, 2009 1 Introduction Outline Decisions, utility maximization Strategic form games Best responses
More informationMeasuring relative phase between two waveforms using an oscilloscope
Measuring relative hase between two waveforms using an oscilloscoe Overview There are a number of ways to measure the hase difference between two voltage waveforms using an oscilloscoe. This document covers
More informationFINAL EXAM, Econ 171, March, 2015, with answers
FINAL EXAM, Econ 171, March, 2015, with answers There are 9 questions. Answer any 8 of them. Good luck! Problem 1. (True or False) If a player has a dominant strategy in a simultaneousmove game, then
More informationAsymmetric Information, Transaction Cost, and. Externalities in Competitive Insurance Markets *
Asymmetric Information, Transaction Cost, and Externalities in Cometitive Insurance Markets * Jerry W. iu Deartment of Finance, University of Notre Dame, Notre Dame, IN 465565646 wliu@nd.edu Mark J. Browne
More informationBackward Induction and Subgame Perfection
Backward Induction and Subgame Perfection In extensiveform games, we can have a Nash equilibrium profile of strategies where player 2 s strategy is a best response to player 1 s strategy, but where she
More informationChapter 12 Monopolistic Competition and Oligopoly
Chapter Monopolistic Competition and Oligopoly Review Questions. What are the characteristics of a monopolistically competitive market? What happens to the equilibrium price and quantity in such a market
More informationINDIVIDUAL WELFARE MAXIMIZATION IN ELECTRICITY MARKETS INCLUDING CONSUMER AND FULL TRANSMISSION SYSTEM MODELING JAMES DANIEL WEBER
INDIVIDUAL WELFARE MAXIMIZATION IN ELECTRICITY MARKETS INCLUDING CONSUMER AND FULL TRANSMISSION SYSTEM MODELING BY JAMES DANIEL WEBER BS, University of Wisconsin  Platteville, 1995 MS, University of Illinois
More informationComputational Finance The Martingale Measure and Pricing of Derivatives
1 The Martingale Measure 1 Comutational Finance The Martingale Measure and Pricing of Derivatives 1 The Martingale Measure The Martingale measure or the Risk Neutral robabilities are a fundamental concet
More informationOptimal Risky Portfolios
Otimal Risky Portolio Otimal Risky Portolios When choosing the otimal allocation between a riskree asset and a risky ortolio, we have assumed that we have already selected the otimal risky ortolio In
More informationFigure: Computing Monopoly Profit
Name: Date: 1. Most electric, gas, and water companies are examples of: A) unregulated monopolies. B) natural monopolies. C) restrictedinput monopolies. D) sunkcost monopolies. Use the following to answer
More informationTable of Contents MICRO ECONOMICS
economicsentrance.weebly.com Basic Exercises Micro Economics AKG 09 Table of Contents MICRO ECONOMICS Budget Constraint... 4 Practice problems... 4 Answers... 4 Supply and Demand... 7 Practice Problems...
More informationI. Noncooperative Oligopoly
I. Noncooperative Oligopoly Oligopoly: interaction among small number of firms Conflict of interest: Each firm maximizes its own profits, but... Firm j s actions affect firm i s profits Example: price
More informationGames and Strategic Behavior. Chapter 9. Learning Objectives
Games and Strategic Behavior Chapter 9 McGrawHill/Irwin Copyright 2013 by The McGrawHill Companies, Inc. All rights reserved. Learning Objectives 1. List the three basic elements of a game. Recognize
More informationModeling Insurance Markets
Modeling Insurance Markets Nathaniel Hendren Harvard April, 2015 Nathaniel Hendren (Harvard) Insurance April, 2015 1 / 29 Modeling Competition Insurance Markets is Tough There is no wellagreed upon model
More informationLocation costs, product quality, and implicit franchise contracts Haucap, Justus; Wey, Christian; Barmbold, Jens
www.ssoar.info Location costs, roduct quality, and imlicit franchise contracts auca, Justus; Wey, Christian; Barmbold, Jens Veröffentlichungsversion / Published Version Arbeitsaier / working aer Zur Verfügung
More informationEconomics 200C, Spring 2012 Practice Midterm Answer Notes
Economics 200C, Spring 2012 Practice Midterm Answer Notes I tried to write questions that are in the same form, the same length, and the same difficulty as the actual exam questions I failed I think that
More information3.4. Bertrand Model Bertrand Model
atilde achado 1 In Cournot, firms decide how much to produce and the market price is set such that supply equals demand. But the sentence price is set is too imprecise. In reality how does it work exactly?
More informationNash Equilibrium. Ichiro Obara. January 11, 2012 UCLA. Obara (UCLA) Nash Equilibrium January 11, 2012 1 / 31
Nash Equilibrium Ichiro Obara UCLA January 11, 2012 Obara (UCLA) Nash Equilibrium January 11, 2012 1 / 31 Best Response and Nash Equilibrium In many games, there is no obvious choice (i.e. dominant action).
More informationEC508: Microeconomic Theory Midterm 3
EC508: Microeconomic Theory Midterm 3 Instructions: Neatly write your name on the top right hand side of the exam. There are 25 points possible. Your exam solution is due Tuesday Nov 24, 2015 at 5pm. You
More informationGAMES FOR BUSINESS AND ECONOMICS
GAMES FOR BUSINESS AND ECONOMICS ROY/GARDNER Indiana University Nachrichtentechnische BibliotHek TUD Inv.Nr.: /S.JOtUM John Wiley & Sons, Inc. 5" New York Chichester Brisbane Toronto Singapore Contents
More informationImperfect Competition. Oligopoly. Types of Imperfectly Competitive Markets. Imperfect Competition. Markets With Only a Few Sellers
Imperfect Competition Oligopoly Chapter 16 Imperfect competition refers to those market structures that fall between perfect competition and pure monopoly. Copyright 2001 by Harcourt, Inc. All rights reserved.
More informationAn optimal batch size for a JIT manufacturing system
Comuters & Industrial Engineering 4 (00) 17±136 www.elsevier.com/locate/dsw n otimal batch size for a JIT manufacturing system Lutfar R. Khan a, *, Ruhul. Sarker b a School of Communications and Informatics,
More informationUniversity of Oslo Department of Economics
University of Oslo Department of Economics Exam: ECON3200/4200 Microeconomics and game theory Date of exam: Tuesday, November 26, 2013 Grades are given: December 17, 2013 Duration: 14:3017:30 The problem
More informationMicroeconomic Theory Jamison / Kohlberg / Avery Problem Set 4 Solutions Spring 2012. (a) LEFT CENTER RIGHT TOP 8, 5 0, 0 6, 3 BOTTOM 0, 0 7, 6 6, 3
Microeconomic Theory Jamison / Kohlberg / Avery Problem Set 4 Solutions Spring 2012 1. Subgame Perfect Equilibrium and Dominance (a) LEFT CENTER RIGHT TOP 8, 5 0, 0 6, 3 BOTTOM 0, 0 7, 6 6, 3 Highlighting
More informationUnraveling versus Unraveling: A Memo on Competitive Equilibriums and Trade in Insurance Markets
Unraveling versus Unraveling: A Memo on Competitive Equilibriums and Trade in Insurance Markets Nathaniel Hendren January, 2014 Abstract Both Akerlof (1970) and Rothschild and Stiglitz (1976) show that
More informationRisk in Revenue Management and Dynamic Pricing
OPERATIONS RESEARCH Vol. 56, No. 2, March Aril 2008,. 326 343 issn 0030364X eissn 15265463 08 5602 0326 informs doi 10.1287/ore.1070.0438 2008 INFORMS Risk in Revenue Management and Dynamic Pricing Yuri
More informationReference Pricing with Endogenous Generic Entry
Reference Pricing with Endogenous Generic Entry Kurt R. Brekke, Chiara Canta, Odd Rune Straume Aril 18, 2016 Abstract Reference ricing intends to reduce harmaceutical exenditures by increasing demand elasticity
More informationOneChip Linear Control IPS, F5106H
OneChi Linear Control IPS, F5106H NAKAGAWA Sho OE Takatoshi IWAMOTO Motomitsu ABSTRACT In the fi eld of vehicle electrical comonents, the increasing demands for miniaturization, reliability imrovement
More informationEconomics II: Micro Fall 2009 Exercise session 5. Market with a sole supplier is Monopolistic.
Economics II: Micro Fall 009 Exercise session 5 VŠE 1 Review Optimal production: Independent of the level of market concentration, optimal level of production is where MR = MC. Monopoly: Market with a
More informationLab O3: Snell's Law and the Index of Refraction
O3.1 Lab O3: Snell's Law and the Index of Refraction Introduction. The bending of a light ray as it asses from air to water is determined by Snell's law. This law also alies to the bending of light by
More information