2. Suppose there are N herders grazing on the common land. Assume the number of sheep owned by herder i (i = 1.N) is q, The profit per sheep is 120-(4, +4, ++4,). a. Write down herder i's objective function. b. Solve for herder i's best response function. c. Compute the number of sheep under NE and compare it with social optimal solution. d. As N increases, find out how the total number of the sheep (q, +4; +.+4) changes. How will the aggregated profit from all herders change? Interpret your findings.

2. Suppose there are N herders grazing on the common land. Assume the number of sheep owned by herder i (i = 1.N) is q, The profit per sheep is 120-(4, +4, ++4,). a. Write down herder i's objective function. b. Solve for herder i's best response function. c. Compute the number of sheep under NE and compare it with social optimal solution. d. As N increases, find out how the total number of the sheep (q, +4; +.+4) changes. How will the aggregated profit from all herders change? Interpret your findings.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter16: Bargaining

Section: Chapter Questions

Problem 2MC

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