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You are competing for a rent with one rival. Your valuation and your competitor's valuation are private information. You believe that the other bidder's valuation is equally likely to lie anywhere in the interval between 0 and $5,000. Your own valuation is $2,000. Suppose that you expect your rival will submit a bid that is exactly one-half of his valuation. Thus you believe that your rival is equally likely to bid anywhere between 0 and $2,500 (depending on the realized valuation between 0 and $5,000).
a. Show that if you submit a bid of B, the probability that you win the contest is the probability that your bid B will exceed your rival's bid, and that this probability of winning is B/250.
b. Your expected profit from bidding B is [200 - B] x Probability of winning. Show that the profit-maximizing strategy consists of bidding half your valuation.
However, this is a short-run analysis where physicians are variable but laboratories are fixed. Suppose that each physician costs $500 per day (for an annual salary of about $175,000) and the daily cost for the laboratory is $1,500 (for rental cos..
A business requires an initial investment of $800000 and annual operating cost of $100000. It generates an annual income of $500000 and a salvage value of $500000 after 4 years . At MARR = 10% and an effective tax rate of 30%, evaluate this invest..
Tennessee just instituted a state lottery. The initial jackpot is $100,000.00. If the first week yields no winners, the next weeks jackpot goes up, depending on the number of previously players who placed the $1.00 lottery bets.
Consider three alternative policies, each with a different set of outcomes in terms of output and inflation, as shown in the following table: Output Policy A (1) 500.0, (2) 515.0, (3) 530.5, (4) 546.4, (5) 562.8. Output Policy B (1) 500.0, (2) 500..
Better Life Nursing Home, Inc., has maintained a dividend payment of $4 per share for many years. The same dollar dividend is expected to be paid in future years. If investors require a 12 percent rate of return on investments of similar risk, det..
Which goal was the most important at the time your article was written?
In the exogenous growth model what are the effects on the steady-state consumption and capital-labor ratio of an increase in the savings rate and of an increase in the population growth rate? Give a graphical illustration of each effect on the ste..
Use the central bank balance sheet to show how a balance-of-payments deficit affects the stock of high-powered money under fixed exchange rates. Show, too, how sterilization operations are reflected in the central bank's balance sheet.
If the two firms pick different prices, the high-price firm earns a profit of $20 and the low-price firm earns a profit of $90.
Explain how you created the differing impressions (what strategies you used). See strategies #2-5 on pages 47-48 for help with this. (Remember, you may not use strategy #1.) Cite specific examples of each strategy you used.
Would your answer change if the replacement cost of its physical capital stock at this time was $25 million? $28 million?
How much profit or loss per haircut does the firm have
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