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
Advantages By definition, mode is the most typical or representative value of a distribution. Hence, when we talk of modal wage, modal size of shoe or modal size of family i

Make a decision about the given claim. Use only the rare event rule, and make subjective estimates to determine whether events are likely. For example, if the claim is that a coi

We are interested in assessing the effects of temperature (low, medium, and high) and technical configuration on the amount of waste output for a manufacturing plant. Suppose that

OmegaPlus Pty.Ltd. is a chain of Health Food stores operating in Australia: with 12 stores across Sydney, Melbourne and Brisbane. OmegaPlus has recently appointed a new CEO: San

The Harmonic Mean is based on the reciprocals of numbers averaged. It is defined as the reciprocal of the arithmetic mean of the reciprocal of the given individual observations. Th

Measures of Dispersion Box 3: Food vs. Oil Below are the figures for foodgrain procurement   and cr

There exists an unclassified data set with hidden data structures in it. The task in this assignment is to perform comprehensive Cluster Analysis in order to reveal the structures

A sample of 43 houses that were purchased in the Southern California town Monrovia within a month was collected. We are interested in the study of the relationships between Price a

In an examination 600 candidates appeared, boys outnumbered girls by 16% of all candidates. number of passed candidates exceeded the number of failed candidates by 310. Boys failin

What is an interaction? Describe an example and identify the variables within your population (work, social, academic, etc.) for which you might expect interactions?