Two companies, Acme and Pinnacle, cach decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are puyoffs and they represent annual profits for the two companies. Acme's Decision Good quality Poor quality Pinnacle's profit - S10,000 Pinnacle's profit - $15,00 Good quality "innacle's Acme's profit$10,000 Acme's profit - $6,000 Decision Pinnacle's profit S6,000 Pinnacle's profit -$12.000 Poor quality Acme's profit - $15,000 Acme's profit - $12,000

Two companies, Acme and Pinnacle, cach decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are puyoffs and they represent annual profits for the two companies. Acme's Decision Good quality Poor quality Pinnacle's profit - S10,000 Pinnacle's profit - $15,00 Good quality "innacle's Acme's profit$10,000 Acme's profit - $6,000 Decision Pinnacle's profit S6,000 Pinnacle's profit -$12.000 Poor quality Acme's profit - $15,000 Acme's profit - $12,000

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 16.1IP

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Consider a market with two firms, A and B, producing two varieties of the same product withdifferent qualities. In particular, the variety produced by firm A has quality Va = 2, while thevariety produced by firm B has quality Vb = 10.Firm A costs are TCa(qa) = 1/2*qa, while firm B costs are TCb(qb) = 2*qbConsumers value quality differently, with each individual i valuing quality bi , a numberbetween 0 and 1. Consumers are distributed uniformly between [0,1]. (As considered in class:that is, for any two values b1 and b2 > b1 in [0,1] the number (or mass) of individuals withbi ∈ [b1, b2] is equal to b2 − b1.)a) Draw a graph illustrating the utility of different individuals (as a function of bi on thehorizontal axis) for the following given value of (Pa, Pb) = (2/3 , 5) . Indicate whichindividuals do not buy anything, which individuals buy the variety from firm A, andwhich individuals buy the variety from firm B.b) What is the value of bi for which an individual is indifferent between…
A6. 1.Adam and Zoey are competing fish and chips sellers in Linear City. They are located at the twoopposing ends of the town’s 3-mile-long Main Street. The 1700 inhabitants of the town are distributeduniformly on Main Street and each of them eats at most one portion of fish and chips for lunch. People’sdisutility from getting to a fish and chips stand and back home amounts to $2 for each mile of distanceto the stand. The marginal cost of producing one portion of fish and chips is $9. The consumers areuniformly distributed along the street. Each consumer has a valuation of $29.0 for the product. Supposethat both Zoey and Adam can advertise at zero cost to inform everyone about their business. Find theequilibrium price of Zoey if neither of the two sellers advertises.
a) Write out the extensive form of a game between a farmer (playing in the first round) and nature (playing a mixed strategy in the second round). Assume that the farmer can either pay a cash rent of $1500 for land (English system) or 1/2 of crop production to the landlord (sharecropping). Assume the farmer is planting corn and will produce 2 tons of corn. Assume that nature has a 50% chance of playing a strategy in which the price of corn is $3500/ton and a 50% chance of playing a strategy in which the price of corn is $500/ton. The farmer keeps any money left after paying cash rent and sells any corn left after paying the landlord in sharecropping. b)What is the most that a risk neutral farmer would be willing to pay for an accurate prediction of the price of corn in problem 1 before choosing whether to pay cash rent or sharecrop?
ADJ Enterprises produces hydrothermocorticoids. The table below shows the costs of producing various quantities of hydrothermocorticoids. Quantity Total Cost Average Cost 0 $0 -- 1 $10 $10.00 2 $12 $6.00 3 $15 $5.00 4 $19 $4.75 5 $24 $4.80 6 $30 $5.00 7 $45 $6.43 ADJ sells its hydrothermocorticoids for $5 each (that is the price regardless of the number of hydrothermocorticoids it sells). Use the Profit-Maximizing Rule to explain the quantity that ADJ should produce to maximize its profits. You may use a calculator. You should explain the details of any calculation you perform. You should identify, explain, and apply the concept you use to answer this question. To receive full credit, your explanation must show all steps in any calculations you perform. Your explanation must also incorporate the profit-maximizing rule – state what that rule is and explain how it applies to ADJ’s situation. Note that it is…
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Write out the extensive form of a game between a farmer (playing in the first round) and nature (playing a mixed strategy in the second round). Assume that the farmer can either pay a cash rent of $1500 for land (English system) or 1/2 of crop production to the landlord (sharecropping). Assume the farmer is planting corn and will produce 2 tons of corn. Assume that nature has a 50% chance of playing a strategy in which the price of corn is $3500/ton and a 50% chance of playing a strategy in which the price of corn is $500/ton. The farmer keeps any money left after paying cash rent and sells any corn left after paying the landlord in sharecropping. What is the most that a risk neutral farmer would be willing to pay for an accurate prediction of the price of corn in problem 1 before choosing whether to pay cash rent or sharecrop?
Please no written by hand solution A local KFC franchisee is evaluating the number of fried chickens to produce each day. The following table shows the 4 alternatives, the states of nature and their payoffs Daily Supply 40 50 60 70 Daily Demand 40 $80 $0 -$80 -$160 50 $80 $100 $20 -$60 60 $80 $100 $120 $40 70 $80 $100 $120 $140 What would your decision be if the following rules are applied? (show your calculation) Maximax Maximin La Place Minimax-regret
The following table presents the valuations that 5 different consumers have for 2 different products. The production costs are $10 per unit of good A and $10 per unit of good B. The firm producing them can choose to price them independently or using a bundling strategy. What is the profit the firm will realize, if it prices optimally? VALUATIONS Product A Product B Consumer 1 5 95 Consumer 2 10 90 Consumer 3 50 50 Consumer 4 80 20 Consumer 5 95 5 ANSWER SHOULD BE 410. I will like if it is right! showing my support. Thank you.
Adani Shantigram is a picturesque township on Ahmedabad-Gandhinagarhighway. The statement ‘The Good quality life’ shows the commitment ofthe developer towards ensuring that the residents enjoy all the amenitiesand services in the township at least cost and inconvenience. In order toensure competitive outcome, ATRICO (Adani Real Estate Arm) hasensured that for all the important services, many service providers arepresent, so that none of them can charge a high monopoly price from theresidents. Therefore, there are 4 milk parlours, 4 laundromats, 4photocopiers, 4 beauty saloons and 4 grocers in the township. Thisnumber ‘4’ has been decided in a high level meeting, where this wasdiscussed that having less than 4 will result in duopoly/tight oligopoly,and having more than 4 will require more space and therefore notpreferred.Last month, the ladies in ‘Water Lily’ complained that the prices chargedby beauty saloons in the township are very high. In order to address thecomplaints, details…
1. A clothing company has available 3,600 meters of yellow fabric, 2,340 meters of blue fabric and 1,500 meters of red fabric, to market them to stores that organize them in two ways; Boxes A and B. Type A boxes contain 30 meters of yellow cloth, 18 meters of Blue cloth and 10 meters of red cloth. Type B boxes contain 10 meters of red cloth, 15 meters of blue cloth and 20 meters of yellow cloth. The boxes have a profit of $3,500 and $3,000 respectively and a manufacturing cost of $10,000 and $8,000 respectively. How many boxes should you make of each type to maximize sales?
Dr. Heinz Doofenshmirtz and Perry the Platipus have decided to venture into farming. They both participated in the venture eqully well, so at the end of the year, their farm produced five geese, each laying golden egs. Perry and Dr. Doof have to decide how to divide these five geese among themselves -- there are no market where they could sell them and there is not sharing or time-share arrangements possible. In other words, either they use the goose or loose it. Evidently, they cannot split an egg-laying goose in half.(a) Give an example of economically efficient allocation of golden egg laying geese between Perry and Dr. Doof. Briefly explain why the allocation you provide is efficient. (b) Give an example of an allocation of geese between the two that you think is fair (equitable). Briefly explain why it is fair in your opinion. (c) If the allocation in (a) is not the same as the one in (b), is it possible to come up with an allocation of geese that would be both efficient and…