payoff) while M gives 1 irrespective of player 1’s strategy.
Therefore, M is eliminated by mixing L and R .
After eliminating M , we can further eliminate D (step 2) and L
(step 3), eventually picks up ( U , R ) as a unique outcome.
Klemperer (2002), “How (not) to Run Auctions: The European 3G Telecom Auctions,” European Economic Review. Milgrom (2004) Putting Auction Theory to Work Cambridge U Press[r]
(1) Write the payoff functions π 1 and π 2 (as a function of p 1 and p 2 ).
(2) Derive the best response function for each player. (3) Find the pure-strategy Nash equilibrium of this game.
(4) Derive the prices (p 1 , p 2 ) that maximize joint-profit, i.e., π 1 + π 2 .
Three Firms (1, 2 and 3) put three items on the market and can advertise these products either on morning (= M ) or evening TV (= E). A firm advertises exactly once per day. If more than one firm advertises at the same time, their profits become 0. If exactly one firm advertises in the morning, its profit is 1; if exactly one firm advertises in the evening, its profit is 2. Firms must make their daily advertising decisions simultaneously.
(a) Characterize the first-best solution.
(b) Suppose that the seller cannot observe θ: θ ∈ {θ L , θ H } and Pr[θ = θ L ] = β with
0 < θ L < θ H . Set up the seller’s optimization problem under this asymmetric
information structure.
(b) If consumer’s choice satis…es the weak axiom of revealed preferences, we can always construct a utility function which is consistent with such choice behav- iour.
(c) If a consumer problem has a solution, then it must be unique whenever the consumer’s preference relation is convex.
Q = K 1 =4
L 1 =8 Then, answer the following questions.
(a) In the short run, the …rm is committed to hire a …xed amount of capital K(+1), and can vary its output Q only by employing an appropriate amount of labor L . Derive the …rm’s short-run total, average, and marginal cost functions. (b) In the long run, the …rm can vary both capital and labor. Derive the …rm’s
3(a - e)/4, is greater than aggregate quantity in the Nash equilib- rium of the Cournot game, 2(a - e)/3, so the market-clearing price is lower in the Stackelberg game.. Thus, i[r]
Both the Bertrand and Cournot models are particular cases of a more general model of oligopoly competition where firms choose prices and quantities (or capacities.). Ber[r]
A function f : D (⊂ R n ) → R is called
1 continuous at a point x 0 if, for all ε > 0, there exists δ > 0
such that d(x, x 0 ) < δ implies that d(f (x), f (x 0 )) < ε.
2 continuous if it is continuous at every point in its domain. 3 uniformly continuous if, for all ε > 0, there exists δ > 0 such