Three firms are bidding for the rights to provide cable television services. The demand for cable television is given by the equation P=100-Q. Firm 1 has an average cost of AC1 = 10, Firm 2 has an average cost of AC2 = 20, and Firm 3 has an average cost of AC3 = 30. If the rights are awarded using an English auction, approximately what is the resulting price and quantity of services provided? (A). P= 10; Q = 90. (B). P = 20; Q = 80. (C). P = 30; Q = 70. (D). P = 20; Q = 90. (E). P = 10; Q = 80
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Three firms are bidding for the rights to provide cable television services. The demand for cable television is given by the equation P=100-Q. Firm 1 has an average cost of AC1 = 10, Firm 2 has an average cost of AC2 = 20, and Firm 3 has an average cost of AC3 = 30. If the rights are awarded using an English auction, approximately what is the resulting price and quantity of services provided?
(A). P= 10; Q = 90.
(B). P = 20; Q = 80.
(C). P = 30; Q = 70.
(D). P = 20; Q = 90.
(E). P = 10; Q = 80.
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- Consider the following situation: five individuals are participating in an auction for an old bicycle used by a famous cyclist. The table below provides the bidders' valuations of the cycle. The auctioneer starts the bid at an offer price far above the bidders' values and lowers the price in increments until one of the bidders accepts the offer. Bidder Value ($) Roberto 750 Claudia 700 Mario 650 Bradley 600 Michelle 550 What is the optimal strategy of each player in this case? Who will win the auction if each bidder places his or her optimal bid? If Claudia wins the auction, how much surplus will she earn?Firm 1 and Firm 2 compete in the same product market by setting quantities q₁ and 92, respectively. They have the same marginal cost c₁ = C₂ = 40. The market demand is p=1240 Q, where Q = 91 +92. 19. Suppose the game is played for one period. What are the equilibrium quantities? (a) q₁ = 1000, 92 1000 (b) q₁ = 800, q2 = 800 (c) 91 = 600, q2 = 600 (d) 9₁ = 400, q2 = 400 (e) 9₁ = 200, q2 = 200 In questions 19-21, suppose that this game is repeated for infinitely many periods. Firms have the same discount rate 8. Consider the situation in which the two firms are trying to implement a collusion scheme. With this intent, they employ the following grim-trigger strategy: in the first period, each firm produces the collusion quantity; from period two onwards, the firm keep producing the collusion quantity as long as no firm has ever pro- duced any quantity other than the collusion quantity; otherwise, the firm plays the Nash Equilibrium of the stage game. As you will see, what varies from one…Problem 6.1. Consider a Stackleberg game of quality competition between two firms. Firm 1 is the leader and firm 2 is the follower. Market demand is described by the inverse demand function P = 1000 - 4Q. Each firm has a constant unit cost of production equal to 20. Please write answers in the boxes provided, showing work in blank areas. (a) The reaction function for firm 2 (follower) is: 92 (91) (b) The demand curve for firm 1 if firm 2 follows its best response is: 9₁ = (c) Optimal output q for each firm. 91 = P = = (d) Market price (from demand curve). (e) Firm profits. π₁ = 92 = C₂ = π2 = (f) Suppose firm 2 has a marginal cost less than firm 1's cost, so c₂ < 20. At what value of c2 would the two firms (leader and ower) have the same market share? Hint: to solve, write firm 2's best response as a function of q₁ and c2, then firm 1's demand and MR as a function of c₂.
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- Question 4: IBM faces two types of buyers for the printers they produce. High-valuation consumers (e..g. businesses) have a higher willingness to pay for quality (here printing speed as ppm) compared to low-valuation customers (e.g. households). We have that the total valuation for the high-valuation customers is TBH(q) = 509 – 192, where q is the printing speed (ppm) and the total valuation for the low-valuation customers is TB:(q) = 509 – 2. A printer of any quality q up 1 to q = 50 costs $250 to produce, independent of the actual speed, but producing a printer faster than q = 50 is impossible.a. Suppose that IBM can perfectly discriminate between the two groups of consumers. What quality is offered to each group? What is the maximum price that IBM can charge each group for the corresponding printer? b. Suppose that IBM cannot tell the two types of customers apart and must rely on consumer self-selection. Assuming that IBM chooses to offer two products of the qualities you derived in…The Government of Malaca has decided to sell pollution permits that will allow people to discharge pollutants into its largest freshwater lake. Each permit represents the right to discharge one tonne of pollutants. Malaca has determined that the lake will tolerate a maximum of 10 tonnes of pollutants per year and has decided to sell the permits using a Dutch auction. This means that the auction starts at a very high price, which is reduced in steps until the price reaches a level that will result in all 10 tonnes of pollution permits being sold at the same price. The results of the bidding are shown in table below. Price per Pollution Bidder Bidder Bidder Bidder Bidder Permit A. B D $5, 500 1 5,000 4,500 4,000 1. 1. 1 2 2. 3 2 1 2 3,500 3,000 2,500 2,000 4 3 2 4 4 4 3 4 4 1,500 7 a. What will be the price of pollution permits as a result of this auction? Price: $ b. Suppose that Bidder E happened to be an environmental protection group. If this group had not participated in the…(a) Assuming that each fishery chooses fi ∈ (0,F), to maximize its payoff function, derive the players’ best response functions and find a Nash equilibrium. (b) Is the equilibrium you found in (a) unique or not? What are equilibrium payoffs? (c) Suppose that a benevolent social planner wants maximize the util- ity of both fisheries. In other words, the social planner solves the following problem: max w(f1, f2) = u1(f1, f2) + u2(f1, f2) (f1 ,f2 )= 2ln(f1)+2ln(f2)+2ln(F −f1 −f2). Find the social planner’s solution. (d) What are the fisheries’ payoffs if the quantities of fish they catch are solutions to the social planner’s problem? What can you say about the Nash equilibrium quantities of fish being caught as compared to the social planner’s solution? (e) If fishery j decides to follow the recommendation of the social planner, how much fish will firm i catch?
- The Government of Malaca has decided to sell pollution permits that will allow people to discharge pollutants into its largest freshwater lake. Each permit represents the right to discharge one tonne of pollutants. Malaca has determined that the lake will tolerate a maximum of 40 tonnes of pollutants per year and has decided to sell the permits using a Dutch auction. This means that the auction starts at a very high price, which is reduced in steps until the price reaches a level that will result in all 40 tonnes of pollution permits being sold at the same price. The results of the bidding are shown in table below. Price per PollutionPermit BidderA BidderB BidderC BidderD BidderE $5,500 2 5,000 4 6 4,500 6 6 1 1 1 4,000 8 7 2 2 2 3,500 10 7 4 3 3 3,000 12 9 6 3 4 2,500 14 10 8 3 5 2,000 16 11 9 4 6 1,500 18 12 10 4 7 a. What will be the price of pollution permits as a result of this auction? Price: $ b. Suppose that Bidder E happened to be an…Consider a Common Value auction with two bidders who both receive a signal X that is uniformly distributed between 0 and 1. The (common) value V of the good the players are bidding for is the average of the two signals, i.e. V = (X1+X2)/2. the symmetric Nash equilibrium bidding strategy for the second-price sealed-bid auction assuming that players are risk-neutral and have standard selfish preferences. Furthermore, you may assume that the other bidder is following a linear bidding strategy. Make sure to explain your notation and the steps you take to derive the result.Consider a market with an incumbent firm, a potential entrant and a buyer with demand D(p) = 180 - p. Suppose the potential entrant is more efficient than the incumbent. The entrant has a unit production cost of $10 whereas the incumbent has a cost of $20 per unit. However, the entrant has to pay an entry cost of F = 500. Before entry, the incumbent can propose the buyer to sign an exclusive contract in exchange of a payment t to the buyer. An exclusive contract prevents the buyer to purchase from the entrant. The timing is as follows: 1. Incumbent offers buyer exclusive contract with payment t 2. B accepts or rejects 3. E decides to enter or not 4. active firms name price to B 5. B chooses supplier (respecting exclusive contract if in place) (a) Suppose no exclusive contract has been signed. Derive the equilibrium prices, profits and consumer surplus if (i) the entrant enters and (ii) the entrant does not enter. (b) Give the minimum amount the incumbent has to pay to induce the buyer…