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A Cab Service Company employs 8 drivers. Each driver is able to serve 20 clients per hour worked. Working hours are flexible, so that each driver is free to choose how many hours she wants to work. For each driver, the effort cost of working is 5h2, where h is the number of hours worked by this driver. The cab company pays each driver a bonus b for each client served by that driver. Each driver's utility equals her own income minus the effort cost of working. Each driver chooses the number of hours that maximize her own utility. The cab company charges each client a price P-52. In addition to the bonus paid to drivers, the company also incurs an operational cost equal to 0.005Q², where Q is to total quantity of clients served by the whole company (Hint: use q to represent the number of clients served by each driver, and Q to represent the total number of clients served by the whole company). The timing of the game is the following: 1) The Cab Company announces the bonus b it will pay drivers for each client served. 2) Each driver then chooses how many hours she will work. Given this information, answer the following qu a) The best response function of each driver is b) In the SPE, the company will optimally offer *Select Answer* h=1b h=2b

A Cab Service Company employs 8 drivers. Each driver is able to serve 20 clients per hour worked. Working hours are flexible, so that each driver is free to choose how many hours she wants to work. For each driver, the effort cost of working is 5h2, where h is the number of hours worked by this driver. The cab company pays each driver a bonus b for each client served by that driver. Each driver's utility equals her own income minus the effort cost of working. Each driver chooses the number of hours that maximize her own utility. The cab company charges each client a price P-52. In addition to the bonus paid to drivers, the company also incurs an operational cost equal to 0.005Q², where Q is to total quantity of clients served by the whole company (Hint: use q to represent the number of clients served by each driver, and Q to represent the total number of clients served by the whole company). The timing of the game is the following: 1) The Cab Company announces the bonus b it will pay drivers for each client served. 2) Each driver then chooses how many hours she will work. Given this information, answer the following qu a) The best response function of each driver is b) In the SPE, the company will optimally offer *Select Answer* h=1b h=2b

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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QUESTION 8 A Cab Service Company employs 8 drivers. Each driver is able to serve 20 clients per hour worked. Working hours are flexible, so that each driver is free to choose how many hours she wants to work. For each driver, the effort cost of working is 5h2, where h is the number of hours worked by this driver. The cab company pays each driver a bonus b for each client served by that driver. Each driver's utility equals her own income minus the effort cost of working. Each driver chooses the number of hours that maximize her own utility. The cab company charges each client a price P=52. In addition to the bonus paid to drivers, the company also incurs an operational cost equal to 0.005Q², where Q is to total quantity of clients served by the whole company (Hint: use q to represent the number of clients served by each driver, and Q to represent the total number of clients served by the whole company). The timing of the game is the following: 1) The Cab Company announces the bonus b it will pay drivers for each client served. 2) Each driver then chooses how many hours she will work. Given this information, answer the following qu ✓ a) The best response function of each driver is b) In the SPE, the company will optimally offer QUESTION 9 Consider the following sequential entry deterra number represents the payoff of Player 1, whil Player 2 L (2,4) a Player 1 R (4,2) b Playe (3,8) *Select Answer* h = 1b h = 2b h = 3b h = 4b h = 5b h = 6b h = 7b h = 8b h = 9b h = 10b 1 2 3 4 5 6 7 8 00 lays first, and then Player 2 plays after observing the choice of Player 1. At the bottom of the decision tree, the first represents the payoff of Player 2.
Transcribed Image Text:QUESTION 8 A Cab Service Company employs 8 drivers. Each driver is able to serve 20 clients per hour worked. Working hours are flexible, so that each driver is free to choose how many hours she wants to work. For each driver, the effort cost of working is 5h2, where h is the number of hours worked by this driver. The cab company pays each driver a bonus b for each client served by that driver. Each driver's utility equals her own income minus the effort cost of working. Each driver chooses the number of hours that maximize her own utility. The cab company charges each client a price P=52. In addition to the bonus paid to drivers, the company also incurs an operational cost equal to 0.005Q², where Q is to total quantity of clients served by the whole company (Hint: use q to represent the number of clients served by each driver, and Q to represent the total number of clients served by the whole company). The timing of the game is the following: 1) The Cab Company announces the bonus b it will pay drivers for each client served. 2) Each driver then chooses how many hours she will work. Given this information, answer the following qu ✓ a) The best response function of each driver is b) In the SPE, the company will optimally offer QUESTION 9 Consider the following sequential entry deterra number represents the payoff of Player 1, whil Player 2 L (2,4) a Player 1 R (4,2) b Playe (3,8) *Select Answer* h = 1b h = 2b h = 3b h = 4b h = 5b h = 6b h = 7b h = 8b h = 9b h = 10b 1 2 3 4 5 6 7 8 00 lays first, and then Player 2 plays after observing the choice of Player 1. At the bottom of the decision tree, the first represents the payoff of Player 2.
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