A new digital file of lectures on the topic of intermediate microeconomics is being marketed on the Internet as a resource to prepare for the final exam. As an experiment the marketing firm wants to direct half of Web hits to a page that advertises the lectures as a resource that provide a 90% probability of successfully passing the final exam, while the other half are directed to a page that advertises the lectures as a resource tha provide a 10% probability of failing to pass the final exam. Would you expect equal numbers of sales from the two advertising approaches? Explain and use the appropriat concepts to answer the question, demonstrating your critical understanding of the

A new digital file of lectures on the topic of intermediate microeconomics is being marketed on the Internet as a resource to prepare for the final exam. As an experiment the marketing firm wants to direct half of Web hits to a page that advertises the lectures as a resource that provide a 90% probability of successfully passing the final exam, while the other half are directed to a page that advertises the lectures as a resource tha provide a 10% probability of failing to pass the final exam. Would you expect equal numbers of sales from the two advertising approaches? Explain and use the appropriat concepts to answer the question, demonstrating your critical understanding of the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Boris and Angela are negotiating a new trade deal, which resembles a modified centipede game. When it is their turn, each of them decides whether to cooperate (C) or to decline (D). Unfortunately, Angela is not sure how much time Boris has for the negotiations before he needs to leave to talk to Emmanuel. With probability p = 4/5, Boris will stay and insist on making the final proposal (long game, L). With probability 1 − p = 1/5, Boris will have to rush off, so that the game ends after Angela’s move (short game, S). Boris has perfect knowledge of his schedule. The structure and payoffs are represented in the game tree below (Attached picture). (a) Specify the set of possible histories H of the game. Underline terminal histories.(b) Specify the set of possible strategies for Boris and Angela.(c) How many subgames does this game have? Indicate all subgames in this game
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Two identically able agents are competing for a promotion. The promotion is awarded on the basis of output (whomever has the highest output, gets the promotion). Because there are only two workers competing for one prize, the losing prize=0 and the winning prize =P. The output for each agent is equal to his or her effort level times a productivity parameter (d). (i.e. Q2=dE1 , Q2=dE2). If the distribution of “relative luck” is uniform, the probability of winning the promotion for agent 1 will be a function of his effort (E1) and the effort level of Agent 2 (E2). The formula is given by...Prob(win)=0.5 + α(E1-E2), where α is a parameter that reflects uncertainty and errors in measurement. High measurement errors are associated with small values of α (think about this: if there are high measurement errors, then the level of an agent’s effort will have a smaller effect on his/her chances of winning). Using this information, please answer the following questions. Both workers have a…
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Tonight at 7pm a professional basketball game featuring the Golden State Warriors and the Washington Wizards will be played at the Chase Center, an indoor arena in the Mission Bay neighborhood of San Francisco, California. Our teaching assistants Yang and Guangchu are making fair bets on the game. During office hours you learn that Yang thinks the Warriors will win and believes he is making a fair bet, assigning a probability of 5/6 or 83 % to the Warriors winning. Guangchu is betting on the Wizards and also believes he is making a fair bet, assigning a probability of 7/12 or 58% to the Wizards winning. You seek to bet a total of $N with Yang and Guangchu and capture a guaranteed, risk-free arbitrage profit. Now assume that N = $240. Let x be the number of dollars bet with Yang. What is the exact range of x that guarantees that your profit is greater than or equal to zero, no matter who wins the game? O 40 < ¤ < 140 O 40 < ¤ < 24O O0 < x< 140 O0
A store manager must hire a clerk to work in her store. The sales of the store are uncertain and also a function of how hard the clerk works. If the clerk works hard (high effort) then there is a 75% chance that sales will be $500 per day and a 25% chance that they will be $100 per day. If the clerk does not work hard (low effort) then there is only a 25% chance that sales will be $500 and a 75% chance that they will be $100. The store manager is risk neutral and her utility is the expected profits of the store i.e.U^Manager = Expected (Sales – Wages). The clerk is risk averse. In addition, the clerk does not like to work hard so exerting high effort lowers her utility. Her utility function is given by U^clerk(w,e)=w^0.5-e where e is either 0 (low effort) or 4 (high effort). Finally, assume that the clerk could work somewhere else where her total utility would be 10. Thus, she will only work in this store if the total utility of working here is at least 10. Below, assume that if the…
Cheryl Druehl Retailers, Inc., must decide whether to build a small or a large facility at a new location in Fairfax. Demand at the location will either be low or high, with probabilities 0.6 and 0.4, respectively. If Cheryl builds a small facility and demand proves to be high, she then has the option of expanding the facility. If a small facility is built and demand proves to be high, and then the retailer expands the facility, the payoff is $230,000. If a small facility is built and demand proves to be high, but Cheryl then decides not to expand the facility, the payoff is $183,000. If a small facility is built and demand proves to be low, then there is no option to expand and the payoff is $250,000. If a large facility is built and demand proves to be low, Cheryl then has the option of stimulating demand through local advertising. If she does not exercise this option, then the payoff is $45,000. If she does exercise the advertising option, then the response to advertising will…