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Question (1): Location Choice of Transfer-Oriented Firms Suppose a transport cost-oriented firm consumes four inputs (I₁ to I4) in order to produce one output, which is consumed at the output market M. Points H₁ and H2 are transportation hubs. I₁ 13 M H2 H₁ 14 12 a) Assume M's monetary weight equals $10. The monetary weight for I1 and I2 is $12 each; the monetary weight for 13 and 14 and is $10 each. Where, if any, is the Nash Equilibrium? (5 pts) b) Now assume the stretch between H2 and 14 (both points included) were a Nash Equilibrium. Assume the same monetary values as under (a) - only the monetary value of 14 can change. What is the value of 14 to attain the required equilibrium? (5 pts) c) Now assume the same values as under (a) - but like under (b) you can change the monetary value of 14. What is the range of 14's monetary value in order to make H2 the Nash equilibrium. What is the minimum value, what is the maximum value? Be precise. (10 pts).

Question (1): Location Choice of Transfer-Oriented Firms Suppose a transport cost-oriented firm consumes four inputs (I₁ to I4) in order to produce one output, which is consumed at the output market M. Points H₁ and H2 are transportation hubs. I₁ 13 M H2 H₁ 14 12 a) Assume M's monetary weight equals $10. The monetary weight for I1 and I2 is $12 each; the monetary weight for 13 and 14 and is $10 each. Where, if any, is the Nash Equilibrium? (5 pts) b) Now assume the stretch between H2 and 14 (both points included) were a Nash Equilibrium. Assume the same monetary values as under (a) - only the monetary value of 14 can change. What is the value of 14 to attain the required equilibrium? (5 pts) c) Now assume the same values as under (a) - but like under (b) you can change the monetary value of 14. What is the range of 14's monetary value in order to make H2 the Nash equilibrium. What is the minimum value, what is the maximum value? Be precise. (10 pts).

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter3: Benefits, Costs, And Decisions
Section: Chapter Questions
Problem 3.4IP
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Question (1): Location Choice of Transfer-Oriented Firms Suppose a transport cost-oriented firm consumes four inputs (I₁ to I4) in order to produce one output, which is consumed at the output market M. Points H₁ and H2 are transportation hubs. I₁ 13 M H2 H₁ 14 12 a) Assume M's monetary weight equals $10. The monetary weight for I1 and I2 is $12 each; the monetary weight for 13 and 14 and is $10 each. Where, if any, is the Nash Equilibrium? (5 pts) b) Now assume the stretch between H2 and 14 (both points included) were a Nash Equilibrium. Assume the same monetary values as under (a) - only the monetary value of 14 can change. What is the value of 14 to attain the required equilibrium? (5 pts) c) Now assume the same values as under (a) - but like under (b) you can change the monetary value of 14. What is the range of 14's monetary value in order to make H2 the Nash equilibrium. What is the minimum value, what is the maximum value? Be precise. (10 pts).
Transcribed Image Text:Question (1): Location Choice of Transfer-Oriented Firms Suppose a transport cost-oriented firm consumes four inputs (I₁ to I4) in order to produce one output, which is consumed at the output market M. Points H₁ and H2 are transportation hubs. I₁ 13 M H2 H₁ 14 12 a) Assume M's monetary weight equals $10. The monetary weight for I1 and I2 is $12 each; the monetary weight for 13 and 14 and is $10 each. Where, if any, is the Nash Equilibrium? (5 pts) b) Now assume the stretch between H2 and 14 (both points included) were a Nash Equilibrium. Assume the same monetary values as under (a) - only the monetary value of 14 can change. What is the value of 14 to attain the required equilibrium? (5 pts) c) Now assume the same values as under (a) - but like under (b) you can change the monetary value of 14. What is the range of 14's monetary value in order to make H2 the Nash equilibrium. What is the minimum value, what is the maximum value? Be precise. (10 pts).
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