Explain strategic bidding problem, Microeconomics

Assignment Help:

Two firms, A and B, are planning to bid for a contract of Motorway extension in Mauritius. Suppose: (1) firm B is a newly established company and has already incurred a start-up cost of $25 million; (2) A and B simultaneously choose to quote either a high or low price; (3) if both A and B quote the same price, the contract is awarded to A because it has been in the market for a long period of time; (4) if both firms submit a high price, A nets $300 million; (5) if both firms submit a low price, A nets $100 million; (6) if A prices high and B prices low, B nets $100 million (after the initial investment) and A nets $0.

(a) Construct the strategic-form game for the above strategic bidding problem.

(b) Explain the dominant strategy and the Nash equilibrium of the game.

(c) The government is the big winner in this case. Explain why.


Related Discussions:- Explain strategic bidding problem

What is neoliberalism, Neoliberalism So much thinking about the proper ...

Neoliberalism So much thinking about the proper role of government in economic growth over the past 2 decades has tends to conclusions which are today known as neo-liberal. The

Determine the business cycle and classical economists, Determine the Busine...

Determine the Business Cycle and Classical Economists Business Cycle:   The business cycle is the fluctuations in the rate of economic growth that take place in the economy. Th

Optimum currency area, Optimum currency area: An optimum currency area...

Optimum currency area: An optimum currency area (OCA), also known as an optimal currency region (OCR), is a geographical region in which it would maximize economic efficiency

E-commerce and supply & demand changes in a business, BACKGROUND:  You have...

BACKGROUND:  You have been promoted to the position of Vice President in a business consulting firm.  This firm provides business consulting to a variety of businesses.   The presi

Substitute product, If we have two products, A and B, which are substitutes...

If we have two products, A and B, which are substitutes, we can expect that a rise in the price of A (or B) will cause the demand for B (or A) to go up.” Examine this statement wit

Rent, determination of rent

determination of rent

Revenue, what is the meaning of total revenue?

what is the meaning of total revenue?

Demand and supply curve with externalities, # 1 Question: Consider a compet...

# 1 Question: Consider a competitive market for Berries. The market demand for the berries is Qd=50-P (Qd is the quantity demanded (cartons) and P is the price in $. The market sup

Human numbers grew as the population after 1800, Human numbers grew as the ...

Human numbers grew as the population after 1800 After 1800, human numbers grew as the population explosion took hold. It carried our entire population to 6 billion in October 1

Policy measures for private sector investment, Policy Measures for Private ...

Policy Measures for Private Sector Investment Policy measures aimed at reforming education financing was made with two major propositions, viz. (i) Improving the efficiency

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd