Reference no: EM133063638
A market is characterized by a demand function Q = 1 - P and by a single firm with constant marginal cost c. The monopolist is facing potential entry from a new firm having the same marginal cost but an additional fixed cost of entry F = 0.1. If the incumbent accepts the entry passively, then Cournot competition is played. However, the monopolist can threaten to produce the competitive output (i.e., the quantity such that P = c) so that the new entrant will make losses if it enters the market. If the new firm does not enter, the incumbent behaves as a monopolist.
1. Assume that c = 0 and compute the payoffs of both firms (i.e., profits) in the cases of Monopoly, Cournot duopoly, and aggressive behaviour.
2. Using the extensive form (game tree) representation, describe this entry game as a twostage game where in the first stage the new entrant decides whether to enter or not, and in the second stage the incumbent firm decides whether to be passive or aggressive in case of entry, while it does nothing in case the new firm does not enter the market.
3. Is the threat of aggressive behaviour by the monopolist credible? Answer the question by finding the subgame perfect equilibrium of the game.
4. Describe the dynamic game using the normal form (pay-off matrix) representation and find the Nash equilibria of the game. Does the game have any Nash equilibria that are not subgame perfect? 3 Assume that incumbent is monopolist in 10 different national markets and it faces the threat of entry in all the markets sequentially (i.e., in stage 1 of the game the monopolist plays the game with a potential entrant in the Belgian market; in stage two the same game is played with another potential entrant for the Dutch market, and so on up to 10 rounds).
5. Find the SPNE of the entire dynamic game by backward induction.
6. Is there room for building a reputation? Explain your answer.
In the Activity "The Significance of Research Questions," what does the reading mention that a research question helps you to avoid? Have you experienced this in your own writing? Why or why not? Now, write one research question with a bias (the incorrect way) on a topic you know well, and then rewrite the the same research question without bias (the correct way). Explain why the original question contained a bias, and how the rewritten version is now without bias. How will the direction given on writing research questions in this Activity affect you in your writing in the future? Please explain.
Assume an entrepreneur has two projects to choose. Both require $100 investment. Assume the entrepreneur is risk-neutral.
Safe project: returns $140 for sure
Risky project: Returns $ 200 with 50% chance and $50 with 50% chance.
A. Calculate total Expected return on each project for the entrepreneur
B. What is his net return (i.e. his profit = Expected return minus his investment) if he had his own money to invest in a project? Which project will he choose?
C. What is his net return if he borrows from a bank with limited liability at 10% interest rate? (in this example in the low payoff state he will pay $50 to the bank as his liability is limited to what he has in his business)? Which project will he choose?
D. What is Bank's expected return in each case (assume 10% interest rate)? Which project will bank prefer?
E. What is social net return on each project (i.e. entrepreneur's return and bank return)? Which project is optimal from societal point of view?
F. If bank required collateral of $100, what would be entrepreneur's return in each case? Which project will entrepreneur choose?
G. If 50% of all borrowers are safe and 50% are risky, what interest rate bank will need to charge to break even if no collateral is required?
A linear supply curve is given by Qs=-225+10P
1. At what price does the quantity supplied first fall to zero? Round to 1 decimal.
2.What is the quantity supplied when the price equals 50?
3.What is the quantity supplied when the price equals 20?
4.How many units are in firms' profit maximizing bundles when the price equals 100?
5.What is the minimum willingness to accept for the 150th unit? Round to 1 decimal
6.What is the marginal cost for the 200th unit? Round to 1 decimal
7.Assume the price of the good is $50, what is total revenue?
8.Assume the price of the good is $50, what is the producer surplus? Round to 2 decimals
9.Assume the price of the good is $50, what is the total cost of production? Round to 2 decimal
Assume that a baseball series lasts 5 games. Suppose a baseball pitcher strikes out an average of 2 players per game;
- Calculate the average number of players struck out by this pitcher per baseball series.
- Calculate the variance of players struck out by this pitcher per baseball series.
- What is the probability that this pitcher strikes out exactly 6 players over a series?