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

Finding the z-score, 10. If a set of scores has a sample mean of 25 and a s...

10. If a set of scores has a sample mean of 25 and a sample variance of 4, find the following: a. the z-score for a raw score of 31 b. the z-score for a raw score of 18 c. the raw

Probability, There are 15 types of ice cream: A,B,C,D,E,F,G,H,I,J,K,L,M,N, ...

There are 15 types of ice cream: A,B,C,D,E,F,G,H,I,J,K,L,M,N, and O. How many combinations are there to sample 5 flavors if you sample 1 flavor 4 times? How many combinations are t

Determine the optimal order size, The Truly Canadian Restaurant stocks a pr...

The Truly Canadian Restaurant stocks a private red table wine that it purchases from a local winery in the Niagara Falls region. The daily demand for the wine at the restaurant is

BMI, Identify the (time, censor) pair for each of the following analyses:

Identify the (time, censor) pair for each of the following analyses:

Measurement errors models, How can we analyse data with four bilateral resp...

How can we analyse data with four bilateral response variables measured with errors and three covariated measured without errors?

Descriptive statistics, Explanation of descriptive statistics Describe ...

Explanation of descriptive statistics Describe what these descriptive statistics show or what recommendations you would create to AIU.  What information do you now have as a re

Determine the subset of variables, Agency revenues. An economic consultant ...

Agency revenues. An economic consultant was retained by a large employment agency in a metropolitan area to develop a regression model for predicting monthly agency revenues ( y ).

QHA, Your employer, Quick Hit Agency (QHA), is a debt collections agency. T...

Your employer, Quick Hit Agency (QHA), is a debt collections agency. The company specializes in collecting small accounts. QHA does not deal in large accounts and does not take on

Decision making ., it is said that management is equivalent to decision mak...

it is said that management is equivalent to decision making? do you agree? explain

Confidence interval for a proportion, The quick method for a confidence int...

The quick method for a confidence interval for a proportion uses as an approximation for a 95% confidence interval.  The margin of error in this case is slightly larger 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