Reference no: EM131252540
Regulating Medications:
Consider a firm (player 1) that produces a unique drug that is used by a consumer (player 2). This drug is regulated by the government so that its price is p = 6. This price is fixed, but the quality of the drug depends on the manufacturing procedure. The "good" (G) manufacturing procedure costs 4 to the firm and yields a value of 9 to the consumer. The "bad" (B) manufacturing procedure costs 0 to the firm and yields a value of 4 to the consumer.
The consumer can choose whether or not to buy at the price p, and this decision must be made before the actual manufacturing procedure is revealed. However, after consumption, the true quality of the drug is revealed to the consumer. The choice of manufacturing procedure, and thus of the cost of production, is made before the firm knows whether the consumer will buy or not.
a. Draw the game tree and the matrix of this game, and find all the Nash equilibria.
b. Now assume that the game is repeated twice. (The consumer learns the quality of the product in each period only if he consumes.) Assume that each player tries to maximize the (nondiscounted) sum of his stage payoffs. Find all the subgame-perfect equilibria of this game.
c. Now assume that the game as repeated infinitely many times. Assume that each player tries to maximize the discounted sum of his or her stage payoffs, where the discount rate is δ ∈ (0, 1). What is the range of discount factors for which the good manufacturing procedure will be used as part of a subgame-perfect equilibrium?
d. Consumer advocates are pushing for a lower price for the drug, say 5. The firm wants to approach the Food and Drug Administration and argue that if the regulated price is decreased to 5 then this may have dire consequences for both consumers and the firm. Can you make a formal argument, using the given parameters, to support the firm? What about the consumers?
|
What would you recommend to the process discussed in article
: Outline issues in the article that you thought were relevant or irrelevant. Why? What would be the advantages and/or disadvantages of adopting the process described in the article? Why? What would you recommend to the process discussed in the article..
|
|
Advancements in computer hardware technology
: One of the most significant advancements in computer hardware technology was the discovery of the transistor. Give a brief history of the transistor, compare and contrast the transistor to the vacuum tube, and then explain why the above statement ..
|
|
Identify trends relevant to your own possible career paths
: First, you should perform a brief industry analysis. This should improve your search results and help you identify trends relevant to your own possible career paths.
|
|
Large role in outcome of second world war
: Encryption and decryption played a large role in the outcome of the Second World War. After the war and for the next few decades, encryption played little or no role in the life of the average person.
|
|
Draw the game tree and the matrix of given game
: Draw the game tree and the matrix of this game, and find all the Nash equilibria. - Find all the subgame-perfect equilibria of this game.
|
|
Find the corresponding jacobian matrix
: Suppose that A is symmetric positive definite (not necessarily diagonally dominant) and that Newton's method is applied to solve the nonlinear system. Is it guaranteed to converge?
|
|
Write lesson plans-childrens comprehensive model
: Select a topic to use as the focus of your lesson plans. The topic should be one that is of interest to children: something in their everyday experience that invites exploration.
|
|
Describe how you will apply this in your own life
: Think back to when you described a bad decision that you made at work in the past, or any work-related decision that you wish you could "do over." Answer the following questions posed by Hunter and Weintraub (2011): (a) "What were you trying to do..
|
|
Scope and the work breakdown structure
: Projects operate in an environment broader than the project itself. Project managers need to take a systems approach when working on projects.
|