User Account

All Pages

Compare the bne prices if firm ls realized cost is high

Assignment Help Game Theory
Reference no: EM13958070

Excercise:3 Two firms, i = 1, 2, sell differentiated goods. The firms set prices PI and P2 simultaneously. We assume that prices have to be non-negative, pi, p2 > 0. The demand function facing firm i is given by

qi(pi,pj) = 2 — pi + pj

(do not worry about negative demand when doing this exercise - in equilibrium demand will be positive).
Firm 1 can have low marginal cost, cL, or high marginal cost, cH, where 0 < cL. < CH < 2. Firm 1 knows whether its marginal cost is low or high. Firm 2 only knows that the probability that Firm 1 has high marginal cost is 0, where < 8 < 1. Firm 2's marginal cost is c = 1 and this is known by both firms. (All this is common knowledge for the firms).
Formulate the situation as a static game of incomplete information, i.e., specify action spaces, type spaces, beliefs, and payoff functions for the two firms.
  • Find the best response functions.
  • Find the Bayesian Nash equilibrium of the game (i.e., find the equilibrium prices).
  • Compare the BNE prices if Firm l's realized cost is high with the equilibrium prices in the game where it is common knowledge that Firm 1 has high marginal cost (cH).
  • Suppose now that Firm 1 does not observe its own marginal cost before it sets its price. I.e., Firm 1 only knows that the probability that it has high marginal cost (cH) is 0. Everything else is as in the original set-up. Which equilibrium concept would you use to solve this game? Explain.

Reference no: EM13958070

Questions Cloud

Researched rhetorical analysis paper : The second essay assignment in ENG102 is the researched rhetorical analysis paper; this paper should be five to seven pages (1250-1750 words) in length, not including a Title and References pages.  To successfully complete this assignment, you will: ..
Report on tourism in new zealand : Write a report on Tourism in New Zealand.Report structure shuold be like
What is the probability of a stock out during lead time : The injection molding department of a company uses 40 pounds of a powder a day. Inventory is reorder when the amount on hand is $240 pounds. Lead time averages five days. It is normally distributed and has a standard deviation of two days. What is th..
What is the percentage of idle time : Balance the assembly line using the information below, and the most following task rule. The desired output is 360 units per day. Available production time per day is 8 hours. What is the percentage of idle time? Assign task to each work station. Wha..
Compare the bne prices if firm ls realized cost is high : Compare the BNE prices if Firm l's realized cost is high with the equilibrium prices in the game where it is common knowledge that Firm 1 has high marginal cost (cH).
Produce part it uses in assembly operation at the rate : A company can produce a part it uses in an assembly operation at the rate of $50 an hour. The company operates 8 hours a day, 300 days a year. Daily usage of the part is 300 parts. The company uses the part every day. The run size is 6000 parts. The ..
Calculate the total overhead assigned to the production : Calculate the total overhead assigned to the production of the Art of Design. Round to two decimal places.
Benefit consultant by pete mc nown : You have been hired as a benefit consultant by Pete Mc Nown, the owner of Pete's Pet Emporium. He wants to establish a retirement plan for himself and his two employees, Ron and Aaron.
Three main media used to communicate with consumers : List and describe the three main media used to communicate with consumers on the Internet. Summarize the ways product information is conveyed in each medium. As an advertiser, what tools can you use to make your website as visited as possible?

Reviews

Write a Review

Game Theory Questions & Answers

  Experimental medication to increase lung capacity

Suppose we want to design a new placebo-controlled trial to evaluate an experimental medication to increase lung capacity.

  Show that in order that aa and pp yield a player same payoff

Show that in order that AA and PP yield a player the same expected payoff when her opponent uses the strategy β, we need β to assign probability (V + v)/2c to AA.

  Evaluating nash equilibrium

Suppose two companies, A and B, that produce super computers. Each can manufacture the next generation super computer  for math or for chip research.

  Find the subgame perfect equilibrium outcomes

Specify each game precisely and find its subgame perfect equilibrium outcomes. Study the degree to which the governing coalition is cohesive (i.e. all its members vote in the same way).

  Find all nash equilibria in pure strategies in given games

Find all Nash equilibria in pure strategies in the following non-zero-sum games. Describe the steps that you used in finding the equilibria.

  Explain from firm as perspective the expected decision

Explain from firm A's perspective the expected decision that firm B will make and does situation have a Nash Equilibrium?

  Find a payoff function consistent with the information

If so, find a payoff function consistent with the information. If not, show why not. Answer the same questions when, alternatively, the decision-maker prefers the lottery.

  You must work alone to complete this quiz do not share

you must work alone to complete this quiz. do not share answers or ideas with other students. write your answers

  Represent game in normal form and find its nash equilibria

Represent the game in normal form and find its Nash equilibria - Draw the best response function for each player using the coordinate system below. Mark Nash equilibria on the diagram.

  Show that the game that results if player one is prohibited

Show that the game that results if player 1 is prohibited from using one of her actions in G does not have an equilibrium in which player 1's payoff is higher than it is in an equilibrium of G.

  Hypothetical data demonstrate the relationship

The following hypothetical data demonstrate the relationship. The dependent variable is a measure of language skill at age 3 for each child. Do the data indicate any significant differences? Test with α=0.05.

  Probability that exactly five students are left-handed

Compute the probability that exactly five students are left-handed.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd