Consider a version of Eliaz and Spiegler model. Suppose that v is distributed uniformly on (0, 1], andrelevance parameter takes two values, 1/2 and 1: Pr(0-1)= a and Pr(0=1/2) = 1-a. Let search costbe equal to s.1. Suppose that the search engine induces expected relevance 0. Show that consumer reservation valuesisv² = 1-280e2. What is the price charged by a firm of quality and its profit?3. Express search engine's fee and profit in terms of 0, 0 and s.4. Suppose that a = 1/8. What is search engine's profit if it induces high relevance, i.e. * = 1? Whatif its profit when it induces distorts search, i.e. 0 = 1/2? Which fee should search engine choose?

1. Thus, the consumer's reservation value is 0. 2. reservation current is 0. 3. Therefore, the…

Answered: values, 1/2 and 1: Pr(0-1)= a and Pr(0=…

Linear Algebra: A Modern Introduction

4th Edition

ISBN:9781285463247

Author:David Poole

Publisher:David Poole

Chapter7: Distance And Approximation

Section7.3: Least Squares Approximation

Problem 31EQ

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