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

Describe the theory of effective demand, Q. Describe the Theory of effectiv...

Q. Describe the Theory of effective demand ? Effective Demand:Theory of effective demand was developed separately in the 1930s by Michal Kalecki andJohn Maynard Keynes. It eluc

Should the Government Provide National Health Insurance, What is meant by t...

What is meant by the multifaceted nature of the U.S. health care system? How is health care financed in the U.S.? What is the advantage and disadvantage of the U.S. multi-payer sys

Perfect competition, At a market price of $21 a toy, what quantity does the...

At a market price of $21 a toy, what quantity does the firm produce in the short run and does the firm make a positive economic profit, a zero economic profit, or an economic loss?

Gift giving etiquette, Manners of reaching to someone's place with a presen...

Manners of reaching to someone's place with a present of anything like flowers, chocolates, etc. In U.S., it's not feel good to give flowers to women by men. If a man giving some g

Demand Supply, Ask quAsk qIf the supply and demand curves for labor are rep...

Ask quAsk qIf the supply and demand curves for labor are represented by the following equations: Wd= -- (1/100)Ld + 30 Ws= (1/200)Ls Ws=Wd Ld=Ld a. Graph the results and show the

Market systems, what is a perfect competition and how does it differ from m...

what is a perfect competition and how does it differ from monopoly?

Axioms - consumer choice involving risk, Axioms: It is possible to con...

Axioms: It is possible to construct a utility index which can be used to predict choice in uncertain situations if the consumer conforms to the following five axioms:  • A

Exchange, China had to convert its yuan into dollars. Does that cause the ...

China had to convert its yuan into dollars. Does that cause the dollar to appreciate or depreciate?

Explain the negative effects of import-substitution policies, Outline the p...

Outline the possible negative effects of import-substitution policies. Define and outline import-substitution; focus on reducing domestic reliance on imports by implementing hi

Compute marginal cost and average total cost, 1.  What is the relationship ...

1.  What is the relationship between a firm's total revenue, profit and total cost? Give an example of hypothetical data and draw the curves. 2.  Define economies of scale and e

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