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
You are a business analyst working for a company called Combined Computers Pty Ltd. You have been asked to prepare a business report with statistics in it for the managing director

The regression line should be drawn on the scatter diagram in such a way that when the squared values of the vertical distance from each plotted point to the line are added, the to

what the purpose we use it

To study the physical fitness of a sample of 28 people, the data below was collected representing the  number of sit-ups that a person could do in one minute.      10    12

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

who invented the chi square test and why? what is central chi square and non central chi square test? what is distribution free statistics? what are the conditions when the chi squ

Coefficient of Variation The standard deviation discussed above is an absolute measure of dispersion. The corresponding relative measure is known as the coefficient of vari

application of chi square test in civil engineering

Evaluate Gross Reproduction Rate: From the data given below compute : i)   General  Fertility  Rate ii)  Specific  Fertility  Rate iii)  Total  Fertility  Rate iv)