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

Probability of remaining paint free, In a three-cornered paint ball duel, A...

In a three-cornered paint ball duel, A, B, and C successively take shots at each other until only one of them remains paint free. The three paint ballers have different probabiliti

Convenience sampling, Convenience Sampling It means a convenient sample...

Convenience Sampling It means a convenient sample is obtained by selecting convents units from the universe. Convenient sample is also known as chunk. It   means a fraction of

Solve linear programming problem using the simplex method, Question: (a...

Question: (a) Shale Oil, located in the island of Aruba, has a capacity of 600,000 barrels of crude oil per day.  The final products from the refinery include two types of unle

Scatter diagram - correlation analysis, Scatter Diagram The first step ...

Scatter Diagram The first step in correlation analysis is to visualize the relationship. For each unit of observation in correlation analysis there is a pair of numerical value

Statistics, just wondering what would be the cost to complete a stats assig...

just wondering what would be the cost to complete a stats assignment

Chi square test, application of chi square test in civil engineering

application of chi square test in civil engineering

Which average is to be used to describe statistical data?, There ar...

There are situations where none of the three averages is fully satisfactory. For example, if the number of items in a series is very small, none of these av

Non-sampling errors, Statistics Can Lead to Errors The use of st...

Statistics Can Lead to Errors The use of statistics can often lead to wrong conclusions or wrong estimates. For example, we may want to find out the average savings by i

Interaction of enviornment and gene , entropy test to measure interaction b...

entropy test to measure interaction between enviornmental factors and genes

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