EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.10P
a
To determine
Nash equilibrium of the second stage game if the entrant enters.
b)
To determine
Possibility of entrant to participate.
c)
To determine
Separating Equilibrium
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Market demand is given by p= 12-Q. There are two firms; the incumbent firm (1) and the entrant firm (E). Incumbent moves first by choosing quantity q, from the interval [0.1]. The entrant observes q and decides whether or not to enter and how much to produce if he enters (qe). There is no fixed cost of entry. If the entrant decides to stay out, his profit is zero and the incumbent enjoys a monopoly position. Suppose that both incumbent and entrant have identical marginal costs equal to c= 8
a) What is the subgame perfect equilibrium of this game? What are the quantities produced by the incumbent and entrant? What are their profits?
b) What is the minimum quantity that must be produced by the incumbent to deter entry (to make entry unprofitable)? In this game, will the incumbent ever try to deter entry by increasing quantity?
Jazmah Industries received a patent on their new ozone generator. The
product will sell for $471, and it will clean the air inside a home and
eliminate 95% of the pollution particles inside the home. Jazmah's market
research shows that there are 111 million homes in North America. The firm
believes an aggressive marketing campaign focusing on heavily polluted
regions of the country will allow them to get about 30% of this market. Their
research shows that about 43% of the houses are in heavily polluted areas.
How many houses are in Jazmah's target market? $674, 424,900 $
6, 744, 249, 000 $4, 242, 275,000 $4, 709, 314, 000 $8, 730, 854, 000
BPO Services is in the business of digitizing information from forms that are filled out by hand. In 2006, a big client gave BPO a distribution of the forms that it digitized in house last year, and BPO estimated how much it would cost to digitize each form.
Form Type
Mix of Forms
Form Cost
A
0.5
$3.00
B
0.5
$1.00
The expected cost of digitizing a form is
.
Suppose the client and BPO agree to a deal, whereby the client pays BPO to digitize forms. The price of each form processed is equal to the expected cost of the form that you calculated in the previous part of the problem.
Suppose that after the agreement, the client sends only forms of type A.
The expected digitization cost per form of the forms sent by the client is
. This leads to an expected loss of
per form for BPO. (Hint: Do not round your answers. Enter the loss as a positive number.)
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
Knowledge Booster
Similar questions
- In which of the following situations would the supplier have the greatest power to hurt a business that is its customer? The supplier is one of 100 companies selling the input needed by the business. The business could use an alternative input mix that uses significantly less of the supplier's product. The supplier rents building space to a bakery in a real estate market with a vacancy rate of less than .5%. The cost for the business to switch to a different supplier is low. 1.arrow_forwardAn expected utility maximiser owns a car worth £60 000 and has a bank account with £20 000. The money in the bank is safe, but there is a 50% probability that the car will be stolen. The utility of wealth for the agent is u(y) = In(y) and they have no other assets. How much the individual would be willing to pay for a full car insurance, i.e., where the indemnity is equal to the value of the car? O a. At most £40 000. O b. At most £60 000. O c. At most £20000. O d. At most £30 000.arrow_forwardAlfred is a Partner. His dependent daughter wants to try making investments using an app on her mobile phone. What must Alfred do? Advise her that before selecting any investments she must check with Alfred, who will then check KICS to determine if the investment is restricted. Record the name of the app in KICS. Advise his daughter that the amounts invested must be less than $100, so he can clearly demonstrate they are not material. Nothing. Mobile phone apps are typically online games and not used for investment purposes.arrow_forward
- B) A firm has the option to decide between two new technologies T1 and T2. The monetary payoffs and probabilities for each technology is given below X2 Probability under state X; Income ($) with TI under state X Income (S) with T2 under state Xi 0.3 0.4 0.3 8 18 6 16 The utility function for the firm is given by u = E(T) – 0 Var(1), where E(x) represents average income, Var(n) represents the variance of income, and 020 1) Show that the firms risk preferences exhibit constant absolute risk aversion (CARA) 2) When 0- 0.1 how does the firms risk premium change under the two technologies TI and T2?arrow_forwardA risk-neutral firm produces chemical products, and its objective is to maximize expected profit. There is a risk that there will be an accident during the production process, and dangerous chemical products will be released into the ocean, polluting the water. To reduce the risk of an accident, the firm can choose Low or High investment in safety. Low Investment in Safety_ Cost for firm= $0 Probability of an Accident = 80% Probability of No Accident =20% High Investment in Safety Cost for firm= $150 Probability of an Accident = 20% Probability of No Accident = 80% The Government wants to reduce the risk of an accident, but the Government cannot observe the fir m's investment in safety. Therefore there is a moral hazard problem. However, the Government can observe whether an accident occurred or not. So the government decides to create a fine (penalty): if an accident occurs, the firm must pay a fine F to the Government. If an accident does not occurs, then the firm does not have to…arrow_forwardABC Explosives has purchased fire insurance for its factory. It can institute a fire prevention program, which would cost $90, but which would lower the probability of a fire from 0.01 to 0.001. The insurance company cannot determine whether ABC has instituted the program. However, it charges a deductible in the event of a fire (i.e. ABC has to pay a certain amount to the insurance company if a fire occurs). What is the smallest deductible that will encourage ABC to institute the fire prevention program?arrow_forward
- when a stock price breaks through the moving average from below this is considered to be a bullish signal. True or falsearrow_forwardEconomics Consider a supplier that manufactures a product at $2 per unit and sells them to retailers at $7 per unit. The retailer sells each product to the end consumer at $10. At this retail price, market demand is normally distributed, with a mean of 1,000 and a standard deviation of 300. The supplier agrees to buy back unsold products for $b even though any leftover product at the end of sale period are worthless. a) What is the retailer's order quantity under local optimization when b=0? b) What is the optimal order quantity under global optimization? Round up to the nearest integer. Derive the optimal value of b. c) With the optimized value of b in the buyback clause, how many discs should an independent retailer order? Round up your solution to the nearest integer. d) What is the expected overstocking given the optimized value of $b? What is the expected understocking given the optimized value of $b? What is retailers' expected profit? What is the manufacturer's expected profit?arrow_forwardYour client, InsureCorp, is an insurance company considering launching an ‘income insurance’ product in the island nation of Autarka. Income insurance is a product that fully insures a household against changes in income caused by a major injury or illness. At present, no businesses are selling income insurance products in Autarka. Initial market research suggests that there are 10,000 households in Autarka interested in purchasing income insurance. Your client expects that the fixed cost of launching the income insurance product will be $20,000,000 per year, and that each policy issued to a customer will cost the company an additional $1,500 in sales commissions. What is the maximum price the company can charge a household for an income insurance policy? What is the expected profit (or loss) for the company if it becomes a monopoly provider of income insurance? Is there a risk that rival insurance companies will also enter the market, selling identical income insurance products? If…arrow_forward
- Soft selling occurs when a buyer is skeptical of the usefulness of a product and the seller offers to set a price that depends on realized value. For example, suppose a sales representative is trying to sell a company a new accounting system that will, with certainty, reduce costs by 10%. However, the customer has heard this claim before and believes there is only a 40% chance of actually realizing that cost reduction and a 60% chance of realizing no cost reduction. Assume the customer has an initial total cost of $800. According to the customer's beliefs, the expected value of the accounting system, or the expected reduction in cost, Is Suppose the sales representative Initially offers the accounting system to the customer for a price of $56.00. The Information asymmetry stems from the fact that the has more Information about the efficacy of the accounting purchase the accounting system, since the expected system than does the . At this price, the customer than the price. value of the…arrow_forwardSoft selling occurs when a buyer is skeptical of the usefulness of a product and the seller offers to set a price that depends on realized value. For example, suppose a sales representative is trying to sell a company a new accounting system that will, with certainty, reduce costs by 10%. However, the customer has heard this claim before and believes there is only a 40% chance of actually realizing that cost reduction and a 60% chance of realizing no cost reduction. Assume the customer has an initial total cost of $400. According to the customer's beliefs, the expected value of the accounting system, or the expected reduction in cost, is . Suppose the sales representative initially offers the accounting system to the customer for a price of $28.00. The information asymmetry stems from the fact that the has more information about the efficacy of the accounting system than does the . At this price, the customer purchase the accounting system, since the expected…arrow_forwarda) According to economic theory, why is there a non-monotonic relation between likelihood of entry and the level of investment made by incumbents? b) Explain the basic idea of product proliferation as a entry deterrence strategy.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning