Question

Assume that there are four firms supplying a homogenous product. They have identical cost functions given by C(Q) =40 Q. If the demand curve for the industry is given by 100 , find the equilibrium industry output if the producers are Cournot competitors. What would be the resultant market price? What are the profits of each firm?

07 Feb 2018
Answer :
Word Count : 16

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Related Questions

What is indirect utility function? How will you derive an indirect utility function from a direct utility function? Explain Roy’s identity?

What is indirect utility function? How will you derive an indirect utility function from a
direct utility function? Explain Roy’s identity?

Explain Arrow’s Impossibility Theorem.

Consider the pay-off matrix of a game given below:

Player 1

Player 2

 

I

O

A

1,1

3,3

N

2,4

4,2

 

 

 

 

 

 

 

(a) Find all the Nash equilibrium of this game. Which player(s), if any, would have a dominant strategy?

(b) Suppose that player 1 moves first by choosing either A or N. Players 2 observe player 1’s action and then choose I or, O. For every action combination, the player’s pay-offs are the same as in the above pay-off matrix. Draw a tree of this new game. How many strategies does player 1 have and what are they? Find all the sub-game perfect equilibria of this game.

(a) Find all the Nash equilibrium of this game. Which player(s), if any, would have a dominant strategy?

(b) Suppose that player 1 moves first by choosing either A or N. Players 2 observe player 1’s action and then choose I or, O. For every action combination, the player’s pay-offs are the same as in the above pay-off matrix. Draw a tree of this new game. How many strategies does player 1 have and what are they? Find all the sub-game perfect equilibria of this game.

Hidden information

. Sita expects her future earnings to be worth Rs. 100. If she falls ill, her expected future earning will be Rs. 25. There is a belief that she may fall ill with probability of 2/3 while the probability of remaining in good health is 1/3
Let her utility function be given as U(y) =y1/2 suppose that an insurance company offers to fully insure Sita against loss of earnings caused by illness against an actuarially fair premium.
(a) Will Sita accept the insurance? Explain.
(b) What is the maximum amount that Sita would pay for the insurance?

Actuarially Fair Premium

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