EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 15, Problem 15.8P
a.
To determine
To describe: The buyers’ maximum
b.
To determine
To calculate: The
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Two parties, Juan and Ben, have been negotiating the purchase by Ben of Juan's car. Juan receives a new and higher bid for his car from Adriana. How might Adriana's bid change Juan and Ben's threat values?
The threat values are unchanged.
Juan now values the car at the price of Adriana's bid, her bid is his opportunity cost of selling the car to Ben, and that opportunity cost is Juan's new threat value.
Juan's new threat value is the product of the difference between Ben and Adriana's offers and the probability the car will be sold to Adriana.
Juan's threat value is unchanged, but Ben has to consider his new opportunity cost
A seller sells a good of quality q at a price t. The cost of producing at quality
level q is given by q2/2. There is a buyer who receives a utility of Xq − t by
consuming the unit of quality q at price t. If he decides not to buy, he gets a
utility of zero. X can take two values X1 = 1 and X2 = 4.
(a) Suppose the seller can observe X. Derive the profit maximizing price-quality
pairs offered when the type is X1 = 1 and when the type is X2 = 4.
(b) Show that the full information price-quality pairs are not incentive compatible
if the seller cannot observe X.
Suppose two bidders compete for a single indivisible item (e.g., a used car, a piece of art, etc.). We assume that bidder 1 values the item at $v1, and bidder 2 values the item at $v2. We assume that v1 > v2.
In this problem we study a second price auction, which proceeds as follows. Each player i = 1, 2 simultaneously chooses a bid bi ≥ 0. The higher of the two bidders wins, and pays the second highest bid (in this case, the other player’s bid). In case of a tie, suppose the item goes to bidder 1. If a bidder does not win, their payoff is zero; if the bidder wins, their payoff is their value minus the second highest bid.
a) Now suppose that player 1 bids b1 = v2 and player 2 bids b2 = v1, i.e., they both bid the value of the other player. (Note that in this case, player 2 is bidding above their value!) Show that this is a pure NE of the second price auction. (Note that in this pure NE the player with the lower value wins, while in the weak dominant strategy equilibrium where both…
Chapter 15 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 15.2 - Prob. 1TTACh. 15.2 - Prob. 2TTACh. 15.2 - Prob. 1MQCh. 15.2 - Prob. 1.1MQCh. 15.2 - Prob. 2.1MQCh. 15.2 - Prob. 1.1TTACh. 15.2 - Prob. 2.1TTACh. 15.2 - Prob. 1.2TTACh. 15.2 - Prob. 2.2TTACh. 15.3 - Prob. 1MQ
Ch. 15.3 - Prob. 2MQCh. 15.4 - Prob. 1MQCh. 15.4 - Prob. 1.1MQCh. 15.4 - Prob. 2.1MQCh. 15.5 - Prob. 1TTACh. 15.5 - Prob. 2TTACh. 15.5 - Prob. 1MQCh. 15.5 - Prob. 2MQCh. 15 - Prob. 1RQCh. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 8RQCh. 15 - Prob. 9RQCh. 15 - Prob. 10RQCh. 15 - Prob. 15.1PCh. 15 - Prob. 15.2PCh. 15 - Prob. 15.3PCh. 15 - Prob. 15.4PCh. 15 - Prob. 15.5PCh. 15 - Prob. 15.6PCh. 15 - Prob. 15.7PCh. 15 - Prob. 15.8PCh. 15 - Prob. 15.9PCh. 15 - Prob. 15.10P
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