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

What are the coefficients of the linear combination, For the following ques...

For the following questions we are interested in a comparison of the 16 years education vs. > 16 years. (Recall we did the analysis on the log scale, so these are actual means on t

Good measure of quality, Education seems to be a very difficult field in wh...

Education seems to be a very difficult field in which to use quality methods. One possible outcome measures for colleges is the graduation rate (the percentage of the students matr

Andrews ‘plots, Andrews ‘Plots A graphical display of multivariate da...

Andrews ‘Plots A graphical display of multivariate data in which an observation, x0 = [x1, x2, . . . , xq] is represented can be represented in the form of function A set

Index number of price for paasche’s method, Construct index numbers of pri...

Construct index numbers of price for the following data by applying: i)      Laspeyre’s method ii)     Paasche’s method iii)    Fisher’s Ideal Index number

Testing of hypothesis, Testing of Hypothesis One objective of sampling...

Testing of Hypothesis One objective of sampling theory is Hypothesis Testing. Hypothesis testing begins by making an assumption about the population parameter. Then we gather

Multiple correspondence analysis, Correspondence Analysis (CA) is a general...

Correspondence Analysis (CA) is a generalization of PCA to contingency tables. The factors of correspondence analysis give an orthogonal decomposi:ion of the Chi- square associated

Regression, Regression line drawn as Y=C+1075x, when x was 2, and y was 239...

Regression line drawn as Y=C+1075x, when x was 2, and y was 239, given that y intercept was 11. calculate the residual

Applied, Question 1 Suppose that you have 150 observations on production (...

Question 1 Suppose that you have 150 observations on production (yt) and investment (it), and you have estimated the following ADL(3,2) model: (1 – 0.5L – 0.1L2 – 0.05L3)yt = 0.7

Explain the central tendency, Explain what central tendency and variability...

Explain what central tendency and variability are. In your answer define what the mean, median, mode, variance, and standard deviation are. What is the difference between the descr

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