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
Examples of grouped, simple and frequency distribution data

Weighted Arithmetic Mean Another aspect to be considered is the importance we assign to each observation. The arithmetic mean as we calculated it so far gives equal

.1 Modern hotels and certain establishments make use of an electronic door lock system. To open a door an electronic card is inserted into a slot. A green light indicates that the

what are the challenges affecting population census in developing countries

Deviation Measures The drawback of the range as a measure of dispersion is that it takes into account the values of only two data points - the largest and the smallest. One

Importance and Application of probability: Importance of probability theory  is in all those areas where event are not  certain to take place as same  as starting with games of

What would be the cutoff score to indicate a score that is in the top 15% of the scores on a test with a mean of 100 and a standard deviation of 15? This question has multiple p

a) List down several measures of central tendency and define the difference among them? b) What do you mean by confidence interval, and why it is useful? What is a confidence lev

In a three-cornered paint ball duel, A, B, and C successively take shots at each other until only one of them remains paint free. Once hit, a player is out of the game and gets no

Index Number Meaning and Definitions of Index Number The index numbers are the special type of averages which are presented in percentages and computed on certain base.