(1.e) Suppose litigation is costly (and the underlying game is as specified originally, before (1.d). When a contract is breached, each player has to pay a court fee (or incur costs) of c in addition to the reliance transfer imposed by the court. To find the induced game in this case, just specify the new payoffs in the matrix below using the payoffs you have from (1.c) and from those, subtract c from each player in each case there is a breach. Firm 1 Invest (I) Not Invest (N) Firm 2 Invest (I) C C Not Invest (N) (1.f) Under what condition on c can (I, I) be enforced with reliance transfers and court costs? (Hint: use the matrix above and look at both cases: (I, N) and (N. I) relative to supporting (I. I) as a NE. Note that in one these, the constrai or requirement on c will not be binding, i.e. the weak inequality will always be satisfied).
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- 5. Consider an exchange economy with 2 agents and 2 goods. a) In an Edgeworth-Bowley diagram, show and illustrate that if both agents have the same preferences, the contract curve is a straight line from the bottom left-hand corner to the top right-hand corner. Explain. b) Does it follow that if the agents do not have the same preferences, the contract curve is not a straight line? Explain. c) Suppose the two agents have the same endowments and the same preferences. Is mutually beneficial trade possible? Illustrate in an Edgeworth Bowley diagram. Explain.8. Suppose that a sales force has found 20 qualified buyers and has begun the sales process. The sales manager estimates that 10% eventually proceeds to make a purchase. Assume that a professional company offers three services, priced at $2,000, $7,000 and $20,000, respectively. Based on past results or the sales manager’s estimates, you project that 60% of first-time buyers will choose the cheapest option, 30% will choose the middle option and 10% will choose the most expensive option. a. Calculate the size of a likely sale for any prospect that makes a purchase. b. How many qualified buyers must be found in order for the company to generate $80,000 in sales in a given period? Your final answer must be rounded to the nearest whole number.Suppose that there are three beachfront parcels of land available for sale in Asilomar and six people who would each like to purchase one parcel. Assume that the parcels are essentially identical and that the minimum selling price of each is $745,000. The following table states each person's willingness and ability to purchase a parcel. Person Willingness and Ability to Purchase (Dollars) Charles 900,000 Dina 810,000 Gilberto 770,000 Juanita 720,000 Lorenzo 690,000 Neha 680,000 Which of these people will buy one of the three beachfront parcels? Check all that apply. Charles Dina Gilberto Juanita Lorenzo Neha Assume that the three beachfront parcels are sold to the people that you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a minimum price of $732,500. This fourth…
- Suppose that a large discount retailer with a lot of purchasingpower in a supply chain requires that all suppliers incorpo-rate a new information system that will reduce the cost of placing orders between the retailer and its suppliers as wellas between the suppliers and their suppliers. Suppose alsothat order quantities and lead times are related; the smallerthe order quantity the shorter the lead time from suppliers.Assume that all members of the supply chain use a continu-ous review system and EOQ order quantities. Explain the im-plications of the new information system for the supply chainin general and the inventory systems of the supply chainmembers in particular1. Suppose an airline announces that its earnings this year are lower than expected due to reducedticket sales. The airline spokesperson gives no information on how the company plans to turnthings around, he only mentioned that the current demand curve is given by p2 - (1/3)q - 4p=0 and the supply curve given by the 2q + 8p - 4p3 = 2p2 a. Find the equilibrium points of the airline b. Find the Choke price c. Current owners of the airline’s stock and potential buyers of the stock would adjust theirestimates of what the value of the corporation’s stock should be. As a result, the supply curvefor the stock would increase by 777 for each price, The demand curve for the stock would totally change to be represent by thisequation - (3p+32)/(16) - q + 50 =0 , find the following i. New supplied curve ii. Slope of demand curve4. Which one of the following statements on the causes of the energy efficiency gap is correct? a. The likelihood of buying an energy-efficient refrigerator is higher if a consumer perceives a discount rate that is much higher than the market discount rate. b. Bounded rationality implies that consumers make decisions by comparing benefits and costs. c. The principal/agent issue points out the possibility that a tenant is likely to use more energy if the utilities are covered in the rent. d. If energy markets are not competitive there will be an energy efficient gap.
- Subject: Manegerial economic & policy Q#1) In your answer to each part below, include references to specific games discussed in thechapter as appropriate.a. If a game has a dominant strategy equilibrium, does it have a Nash equilibrium?b. If a game has a Nash equilibrium, does it have a dominant strategy equilibrium?c. If one firm has a dominant strategy, can another firm take advantage of that fact in decidingon its optimal strategy?d. Can a game have more than one dominant strategy equilibrium? Can a game havemore than one Nash equilibrium?1. Suppose an airline announces that its earnings this year are lower than expected due to reduced ticket sales. The airline spokesperson gives no information on how the company plans to turn things around, he only mentioned that the current demand curve is given by p^2-1/(3 ) q-4p=0 and the supply curve is given by 2q + 8p -4p^3=2p^2 a. Find the equilibrium points of the airlineb. Find the Choke price c. Current owners of the airline’s stock and potential buyers of the stock would adjust their estimates of what the value of the corporation’s stock should be. As a result, the supply curve for the stock would increase by 086 for each price. The demand curve for the stock would totally change to be represent by this equation-(3p+32 )/16- q + 50=0 , find the following i. New supplied curve ii. Slope of demand curveQ. 5. For auto makers, an important decision is to determine what features a new car model should be provided based on cost-benefit analysis. In what ways can economists help auto manu- facturers estimate the marginal rate of substitution between features such as vehicle interior size and acceleration? (a) Examining production cost data (b) Conducting consumer surveys about willingness to pay for auto features (c) Solving the standard consumer model (d) Statistically analyzing historical data on purchases of different types of autos (e) B and D only Q. 10. When firms determine whether to invest in research and development (R&D), they need to consider many factors. Which of the following is NOT one of the important factors that should be considered? (a) The market size of the product today. (b) The market potential for the product in the next few years. (c) The R&D investment of the competitors on similar products. (d) Potential new products that may be substitutes of the…
- COURSE: MICROECONOMICS 2 - TWO-PART RATE True/False/Uncertain a) Higher marginal cost (higher level, but always constant), lower fixed part in the Two-Part Tariff. JUSTIFYb) If a company applies a two-part tariff, it is better to invest in advertising, because only fixed part of two-part tariff increases. JUSTIFY c) The greater the consumer's willingness to pay, the more convenient is the two-part tariff. JUSTIFY d) If the fixed part is equal to the variable part, in a two-part tariff, it implies that the firm is in perfect competition. JUSTIFYAssume Allergan, Inc. is facing a capacity constraint in manufacturing Botox®. Analytically, this implies its marginal cost curve is extremely steep. As Botox® is oftentimes used for cosmetic reasons, it is reasonable to assume consumers have quite elastic demand curves. Hypothetically, assume a forthcoming study will highlight the safety of Botox® for cosmetic procedures. Given this potential study, where should Allergan, Inc. focus its strategic resources? a. Operations, specifically finding ways to lower costs in an effort to justify a price increase. b. Staffing, specifically preparing to significantly increase its staff to prepare for a large increase in the number of units of Botox® sold. c. Marketing/Pricing, specifically preparing to significantly raise the price for Botox®.2. Compute the equilibrium prices, quantities, and profits for both firms. Consider now the first stage. 3. Show that in equilibrium firms will go for a maximal quality difference. (Hint: take partial of equilibrium profits with respect to s2 − s1) 4. If you were a lobbyist for firm 1, as a business strategy would you argue to the policymakers to introduce legislation – in the name of safety and quality of course – that increases or decreases the value of c?