Uncertain demand, Applied Statistics

Consider a Cournot duopoly with two firms (fi rm 1 and fi rm 2) operating in a market with linear inverse Demand P(Q) = x Q where Q is the sum of the quantities produced by both rms and x is a parameter that captures the level of demand in this industry. Firms have 0 cost of production. The demand for the good is uncertain: it is high, x = xH, with probability 1/3 and it is low, x = xL (< xH), with probability 2/3. Furthermore, information is asymmetric: rm 1 knows whether demand is high or low but rm 2 does not. All this is common knowledge. The two rms simultaneously choose quantities.

(a) What are the actions, types, beliefs and payo s of both rms?

(b) Suppose that 7xL > xH. Find the Bayesian Nash equilibrium of the game.

(c) Compare the quantities chosen by rms 1 and 2. Interpret the result.

Now, call q1-H and q2-H the quantities chosen by rms 1 and 2 if the demand is high under complete information (that is, when both know it). Also, call q1-L and q2-L  the quantities chosen by rms 1 and 2 if the demand is low under complete information (that is, when both know it).

(d) Find (q1-H ,  q2-H, q1-L , q2-L) Compare these quantities with the quantities determined in the case of incomplete information. Interpret the result

Posted Date: 3/14/2013 3:44:11 AM | Location : United States







Related Discussions:- Uncertain demand, Assignment Help, Ask Question on Uncertain demand, Get Answer, Expert's Help, Uncertain demand Discussions

Write discussion on Uncertain demand
Your posts are moderated
Related Questions
The mean tax-return preparation fee H&R Block charged retail customers in 2012 was $183 (The Wall Street Journal, March 7, 2012). Use this price as the population mean and assume t

how to interpret results, a good explanation to help me understand.

Geometric Mean The geometric mean   of numbers is defined as the th root of the product of numbers .It is obtained by multiplying all the values of a variable and then extracti

If the test is two-tailed, H1:  μ ≠  μ 0  then the test is called two-tailed test and in such a case the critical region lies in both the right and left tails of the sampling distr

Collect data about the chosen business problem or opportunity at the company. Explain how you obtained a suitable sample of either qualitative or quantitative data. Review data f

Suppose both the Repair record 1978 and Company headquarters are believed to be significant in explaining the vector (Price, Mileage, Weight). Here, because of the limited sample s

Universe or Population The word universe as used in statistics denotes the aggregate from which a sample is to be taken. According to Simpson and Kafka, a universe or populatio

You are given the differential equation dy/dx = y' = f(x, y) with initial condition y(0 ) 1 = . The following numerical method is also given: where  f n = f( x n , y n )

In simple regression the dependent variable Y was assumed to be linearly related to a single variable X. In real life, however, we often find that a dependent variable may depend o

(a) The Horton's initial infiltration capacity for a catchment is 204 mm/h and the constant infiltration value at saturation is 60 mm/h. For a rainfall in excess of 204 mm/h mainta