(Qjoe + Qsarah)- Joe has a constant marginal cost of $10, known to both- Joe's expectation about Sarah's constant marginal cost is: 12 with probability 0.6 C2 = {- 8 with probability 0.4 Question 1(a): Solve for the above Cournot-Nash equilibrium with asymmetric information with Sarah as a high cost supplier (C2 = 12 . unknown to Joe) %3D Question 1(b): Solve for the above Cournot-Nash equilibrium with asymmetric information with Sarah as a low cost supplier (C2 = 8 ... unknown to Joe) Question 1(c): Solve for the above Cournot-Nash equilibrium with complete information with Sarah as a high cost supplier (C2 = 12 ... known to Joe)

(Qjoe + Qsarah)- Joe has a constant marginal cost of $10, known to both- Joe's expectation about Sarah's constant marginal cost is: 12 with probability 0.6 C2 = {- 8 with probability 0.4 Question 1(a): Solve for the above Cournot-Nash equilibrium with asymmetric information with Sarah as a high cost supplier (C2 = 12 . unknown to Joe) %3D Question 1(b): Solve for the above Cournot-Nash equilibrium with asymmetric information with Sarah as a low cost supplier (C2 = 8 ... unknown to Joe) Question 1(c): Solve for the above Cournot-Nash equilibrium with complete information with Sarah as a high cost supplier (C2 = 12 ... known to Joe)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Q.3

1) Cournot Model with Asymmetric Information- Suppose the inverse demand function is P(Q) = 30 – 0.2 ×
(Qjoe + Qsarah)- Joe has a constant marginal cost of $10, known to both- Joe's expectation about Sarah's
constant marginal cost is:
12 with probability 0.6
C2 = {-
8 with probability 0.4
Question 1(a): Solve for the above Cournot-Nash equilibrium with asymmetric information with Sarah as a
high cost supplier (C2 = 12 ... unknown to Joe)
%3D
Question 1(b): Solve for the above Cournot-Nash equilibrium with asymmetric information with Sarah as a
low cost supplier (C2 = 8 ... unknown to Joe)
Question 1(c): Solve for the above Cournot-Nash equilibrium with complete information with Sarah as a
high cost supplier (C2 = 12 ... known to Joe)
Question 1(d): Solve for the above Cournot-Nash equilibrium with complete information with Sarah as a
low cost supplier (C2 = 8) .. known to Joe)
%3D
Question 1(e): If Sarah is a low cost supplier, what is the maximum she would be willing to spend to
convince Joe of her cost?

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