Uncertain demand, Applied Statistics

Assignment Help:

Consider a Cournot duopoly with two firms (fi rm 1 and fi rm 2) operating in a market with linear inverse Demand P(Q) = x Q where Q is the sum of the quantities produced by both rms and x is a parameter that captures the level of demand in this industry. Firms have 0 cost of production. The demand for the good is uncertain: it is high, x = xH, with probability 1/3 and it is low, x = xL (< xH), with probability 2/3. Furthermore, information is asymmetric: rm 1 knows whether demand is high or low but rm 2 does not. All this is common knowledge. The two rms simultaneously choose quantities.

(a) What are the actions, types, beliefs and payo s of both rms?

(b) Suppose that 7xL > xH. Find the Bayesian Nash equilibrium of the game.

(c) Compare the quantities chosen by rms 1 and 2. Interpret the result.

Now, call q1-H and q2-H the quantities chosen by rms 1 and 2 if the demand is high under complete information (that is, when both know it). Also, call q1-L and q2-L  the quantities chosen by rms 1 and 2 if the demand is low under complete information (that is, when both know it).

(d) Find (q1-H ,  q2-H, q1-L , q2-L) Compare these quantities with the quantities determined in the case of incomplete information. Interpret the result


Related Discussions:- Uncertain demand

Carry out a t-test, Suppose that before the minimum wage law change, the un...

Suppose that before the minimum wage law change, the underlying mean number of part-time employees per Burger King Restaurant in New Jersey was 20.3. It was thought that the increa

Statistical process control, Statistical Process Control The variabilit...

Statistical Process Control The variability present in manufacturing process can either be eliminated completely or minimized to the extent possible. Eliminating the variabilit

Harmonic mean, The Harmonic Mean is based on the reciprocals of numbers ave...

The Harmonic Mean is based on the reciprocals of numbers averaged. It is defined as the reciprocal of the arithmetic mean of the reciprocal of the given individual observations. Th

Find the inverse laplace transform, Q. Find the inverse Laplace transform o...

Q. Find the inverse Laplace transform of Y (s) = s-4/s 2 + 4s + 13 +3s+5/s 2 - 2s -3. Q. Use the Laplace transform to solve the initial value problem y''+ y = cos(3t), y(0) =

Asymmetric proximity matrices, Asymmetric proximity matrices Immediacy...

Asymmetric proximity matrices Immediacy matrices in which the off-diagonal elements which are, in the i th row and j th column and the j th row and i th column, are not essent

Time series, Year Production 2006 8 2007 6 2008 10 2009 12 2010 11 2011 15 ...

Year Production 2006 8 2007 6 2008 10 2009 12 2010 11 2011 15 2012 14 2013 16 Determine the trend from data given above?

Accelerated failure time model, Accelerated Failure Time Model A basic m...

Accelerated Failure Time Model A basic model for the data comprising of survival times, in which the explanatory variables measured on an individual are supposed to act multipli

Determine market interest rate, The interest rate on the three year loan is...

The interest rate on the three year loan is 0.087. Whereas the interest rate on the two year loan is 0.085 as given in A. Suppose that the liquidity premium at t=1 is 0.002 and tha

Write Your Message!

Captcha
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!

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