Reference no: EM131329745
A war of attrition game.) Two small grocery stores on the same block are feeling the effects of a large supermarket that was recently constructed a half-mile away.
As long as both remain in business, each will lose $1000 per month. On the first day of every month, when the monthly rent for the stores is due, each grocer who is still in business must independently decide whether to stay in business for another month or to quit. If one grocer quits, then the grocer who remains will make $500 per month profit thereafter.
Assume that, once a grocer quits, his or her lease will be taken by some other merchant (not a grocer), so he or she will not be able to reopen a grocery store in this block, even if the other grocer also quits. Each grocer wants to maximize the expected discounted average value of his or her monthly profits, using a discount factor per month of δ = .99.
a. Find an equilibrium of this situation in which both grocers randomize between staying and quitting every month until at least one grocer quits.
b. Discuss another way that the grocers might handle this situation, with reference to other equilibria of this game.
c. Suppose now that grocer 1 has a slightly larger store than grocer 2. As long as both stores remain in business, grocer 1 loses $1200 per month and grocer 2 loses $900 per month. If grocer 1 had the only grocery store on the block, he would earn $700 profit per month.
If grocer 2 had the only grocery store on the block, she would earn $400 per month.
Find an equilibrium of this situation in which both grocers randomize between staying and quitting every month, until somebody actually quits. In this equilibrium, which grocer is more likely to quit first?
|
Investment project provides cash inflows
: An investment project provides cash inflows of $1,250 per year for eight years. What is the project payback period if the initial cost is $4,050? What is the project payback period if the initial cost is $5,100?
|
|
Outline the response to increase in demand
: In a competitive industry each firm has total costs C = q2 + 25. Demand increases from D0 =150 - 5p to D1 = 300 - 5p. Provide a pair of fully labeled diagrams showing "The Firm" and"The Industry" to outline the response to this increase in demand.
|
|
Does that mean that because of its larger mass
: Does that mean that because of its larger mass, Argon exerts a higher pressure on the container walls than He at the same molar density, volume, and temperature? Explain your answer.
|
|
Absence of a price floor
: In the absence of a price floor, the maximum price that a few of the consumers are willing to pay up to $100 per barrel of gosum berries. The market equilibrium (E) price is $50 per barrel. How much consumer surplus is created, when there is no pr..
|
|
Find an equilibrium of the given situation
: Find an equilibrium of this situation in which both grocers randomize between staying and quitting every month until at least one grocer quits.
|
|
Review the diversity statements from several institutions
: Review the diversity statements from several institutions. Consider what you find to be most compelling and clear in these statements and what you would want to refine or delete.
|
|
How will the data collected influence a change in process
: Analysis phase: Now that a new EHR system has been selected, how will the Information Systems staff collaborate with the users from the various departments to determine user needs for the design phase of the implementation? How will the data colle..
|
|
Determine the probability q that makes the scenario
: Write a system of equations that determine the probability q that makes this scenario a subgame-perfect equilibrium, once 8 is specified, as long as 8 is not too small.
|
|
What are the major points of the case
: The Brazilian sun beat down steadily on the tarmac outside as Alessandro Silva and Agosto Venturastood inside the São Paulo-Guarulhos International Airport. What are the major points of the case? What lessons can be gleaned from the experiences tha..
|