{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# ps5 - 2 What are the two bundles oﬀered and their...

This preview shows page 1. Sign up to view the full content.

Problem Set 5 Due Thursday, Nov. 12th, by 10pm 1. Suppose there are two types of consumers. Type 1 consumers’ willingness to pay for x is given by 16 x 1 / 2 . Type 2 consumers’ willingness to pay for x is given by 20 x 1 / 2 . The fraction of Type 1 consumers is given by γ . The ﬁrm producing x is a monopolist with a marginal cost of 2. (a) Suppose the ﬁrm can observe consumer types. What bundles will be oﬀered to each type of consumer for what fees? How does your answer depend on γ ? For the rest of this problem, assume that the ﬁrm cannot observe consumer types. (b) Write out the individual rationality constraints and incentive compatibility constraints. Which of these will hold with equality? (c) Suppose γ = 1 /
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 2. What are the two bundles oﬀered and their corresponding fees? (d) Using isoproﬁt and indiﬀerence curves, graph your answers to (a) and (c). 2. Consider the two player game below where a ≤ 2 L C R T 3 , 1 a, 0 7 ,-1 1 M a, 2 , 5 7 , 1 B a-1 , 7 1 , 7 6 , 6 (a) Find all pure strategy Nash equilibria (b) Suppose a = 0. Find a mixed strategy equilibrium. Now suppose a =-1. Again ﬁnd a mixed strategy equilibrium. What is the intuition for how a changes the mixed strategy equilibrium? (c) Suppose now 1 gets to move ﬁrst. Draw the extensive form game. Find all subgame perfect Nash equilibria and one Nash equilibrium that is not subgame perfect. 1...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online