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1. Supposé thèřé éxišt n=30 firmš thát šeek to become a regulated franchise monopoly in a particular area due to that area's policies. Suppose that obtaining the franchise status will get that firm an additional R = $12 million in profits. Each firm already receives $5 million in profits from other ventures. a. Suppose the probability of winning the franchise status is linear in investment, each firm has an equal chance of winning the franchise status and they are all risk-neutral. How much will each firm invest in rent- seeking? b. Are the rents 100% dissipated?

1. Supposé thèřé éxišt n=30 firmš thát šeek to become a regulated franchise monopoly in a particular area due to that area's policies. Suppose that obtaining the franchise status will get that firm an additional R = $12 million in profits. Each firm already receives $5 million in profits from other ventures. a. Suppose the probability of winning the franchise status is linear in investment, each firm has an equal chance of winning the franchise status and they are all risk-neutral. How much will each firm invest in rent- seeking? b. Are the rents 100% dissipated?

A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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1. Suppose there exist n=30 firms that seek to become a regulated franchise monopoly in a particular area due to that area's policies. Suppose that obtaining the franchise status will get that firm an additional R = $12 million in profits. Each firm already receives $5 million in profits from other ventures. a. Suppose the probability of winning the franchise status is linear in investment, each firm has an equal chance of winning the franchise status and they are all risk-neutral. How much will each firm invest in rent- seeking? b. Are the rents 100% dissipated?
Transcribed Image Text:1. Suppose there exist n=30 firms that seek to become a regulated franchise monopoly in a particular area due to that area's policies. Suppose that obtaining the franchise status will get that firm an additional R = $12 million in profits. Each firm already receives $5 million in profits from other ventures. a. Suppose the probability of winning the franchise status is linear in investment, each firm has an equal chance of winning the franchise status and they are all risk-neutral. How much will each firm invest in rent- seeking? b. Are the rents 100% dissipated?
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