1. Consider the following interaction between a single long lived firm,and a sequence of short-lived consumer. In each period t = 1,2..., there is asingle consumer who only lives for one period. The consumer must choosebetween the actions BUY and NOT BUY (i.e. B and N). The firm mustchooose what quality level to provide, i.e. it must choose between H andL. The payoffs to the two parties are given by the following table, whereVH > P > VL and p > CH > CL.BNHLUHP, P- CH VLP, PCL0,00,0a) Solve for the Nash equilibria of the above stage game.b) Suppose that the firm discounts payoffs at rate 6, where 0 < d < 1.Each consumer at date t observes the actions of the firm and of previousconsumers in all previous periods, 1,2..., t - 1. Show that there exists a sub-game perfect equilibrium where the firm provides high quality, if & is largeenough. (Hint: construct a trigger strategy equilibrium).

A stage game is where the players move simultaneously, one stage payoff will not affect the other,…

1. Consider the following interaction between a single long lived firm, and a sequence of short-lived consumer. In each period t = 1, 2.….., there is a single consumer who only lives for one period. The consumer must choose between the actions BUY and NOT BUY (i.e. B and N). The firm must chooose what quality level to provide, i.e. it must choose between H and L. The payoffs to the two parties are given by the following table, where Ví > p > v₁ and p > CH > CL- H L VH-P₂P-CH VL-P, P-CL 0,0 В N 0,0 a) Solve for the Nash equilibria of the above stage game. b) Suppose that the firm discounts payoffs at rate d, where 0 < d < 1. Each consumer at date t observes the actions of the firm and of previous consumers in all previous periods, 1, 2..., t – 1. Show that there exists a sub- game perfect equilibrium where the firm provides high quality, if & is large enough. (Hint: construct a trigger strategy equilibrium).

1. Consider the following interaction between a single long lived firm, and a sequence of short-lived consumer. In each period t = 1, 2.….., there is a single consumer who only lives for one period. The consumer must choose between the actions BUY and NOT BUY (i.e. B and N). The firm must chooose what quality level to provide, i.e. it must choose between H and L. The payoffs to the two parties are given by the following table, where Ví > p > v₁ and p > CH > CL- H L VH-P₂P-CH VL-P, P-CL 0,0 В N 0,0 a) Solve for the Nash equilibria of the above stage game. b) Suppose that the firm discounts payoffs at rate d, where 0 < d < 1. Each consumer at date t observes the actions of the firm and of previous consumers in all previous periods, 1, 2..., t – 1. Show that there exists a sub- game perfect equilibrium where the firm provides high quality, if & is large enough. (Hint: construct a trigger strategy equilibrium).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

3. Suppose a company produces 2 products, X and Y, and has 3 potential buyers, A, B, and C. The following table summarizes each potential buyer's willingness to pay for each good: A В C 4 3 Y For simplicity, assume there is no production cost.
A7 You are the manager of a bakery that produces and packages gourmet muffins, and you currently sell muffins in packages of 3. A consultant’s report has estimated the (inverse) demand of a typical consumer to: P = 3 − 0.5Q If your cost of producing bran muffins is C(Q) = Q: (a) What is the marginal cost of muffins? (b) Draw the demand and marginal cost on a diagram. (c) Determine the optimal number of muffins to sell in a single package. (d) What price should the firm charge for each park?
A search good is a product that: a) is not yet available, but consumer desires for it are known. b) can easily be evaluated before purchase. c) is difficult to locate, so it takes time to find it. d) is produced with rare or hard-to-find inputs.
The American Pharmaceutical Company (APC) has a policy that all capital investments must have a five-year or less discounted payback period in order to be considered for funding. The MARR at APC is 9% per year. Is the above project able to meet this benchmark for funding? What is the payback period?
In the following problem, find the profit maximizing quantity and graph the marginal revenue and marginal cost. Interpret your first-order condition in terms of marginal benefit and marginal cost. max π = (12 - Q)Q-20² 9
Suppose Michelle owns a women's clothing boutique. Each year, her total revenue is $300,000 and her explicit costs are $160,000. In addition, Michelle estimates that the opportunity cost of the resources she puts into her business is $90,000 per year. What is Michelle's economic Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
(Please attempt thus question if you will provide Solution for both questions below...thanks) 1) If a firm wanted to reduce the annual EOQ cost as a percentage of the annual purchase cost by 50 percent, how would the demand rate have to change? A) Decrease by 50 percent. B) Remain unchanged. C) Increase by 50 percent. D) Double. E) Quadruple. Select correct option and explain answer with Calculation. 2) A firm evaluates its EOQ quantity to equal 180 cases, but it chooses an order quantity of 200 cases. Relative to the order quantity of 180 cases, the order quantity of 200 cases has A) higher ordering cost and higher holding cost. B) higher ordering cost and lower holding cost. C) lower ordering cost and higher holding cost D) lower ordering cost and lower holding cost.
15) If the average cost (AC) of producing a good is increasing as a firm produces moreoutput (q), then which of the following must be TRUE?A) AFC is falling; AVC is rising; MC > AVCB) AFC is falling; AVC is falling; MC > AVCC) AFC is rising; AVC is rising; MC > AVCD) AFC is rising; AVC is rising; MC < AVCE) AFC is falling; AVC is falling; MC < AVC
Problem 6 Casper consumes cocoa and cheese. Cocoa is sold in an unusual way. There is only one supplier, and the more cocoa you buy from him, the higher the price you have to pay per unit. In fact y units of cocoa will cost Casper y² dollars (i.e. the price of y units is y dollars, hence the quadratic cost). Cheese is sold in the usual way at a price of 2 dollars per unit. Casper's income is 20 dollars and his utility function is U(x, y) = x+2y, where z is his consumption of cheese and y is his consumption of cocoa. a. Sketch Casper's budget set and shade it in. b. Sketch some of his indifference curves and label the optimal bundle that he chooses. c. Calculate the amount of cheese and the amount of cocoa that Casper demands at these prices and this income, i.e. calculate the optimal bundle. (Recall that you can find the slope of any curve using the Total Differential, i.e. the MRS formula works in general)