hw8 - 1 ; h 2 ) , the value of the subsidy that gets...

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ECON 401: Assignment 8 due date: November 30, 2011 1. Consider the all-pay sealed-bid auction: & one object is for sale; n bidders and the values are i.i.d. distributed on [0 ; 1] with the cdf function F ( ) ; & bidders submit bids (his price to buy the price) in sealed envelops; & every bidder pays his bidding price; & The one bidding the highest price wins the auction, i.e., gets the object; What is the symmetric and increasing bidding equilibrium? 2. There are two ±rms in an industry. Each can try to convince Congress to give the industry a subsidy. For i 2 f 1 ; 2 g , let h i denote the number of hours of e/ort put in by ±rm i , and let c i ( h i ) = ( h i ) 2 be the cost of e/ort to ±rm i . When the e/ort levels of the ±rms are ( h
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Unformatted text preview: 1 ; h 2 ) , the value of the subsidy that gets approved is 10 ( h 1 + h 2 ) + & h 1 h 2 , where & is a constant. Then, the subsidy well be splitted evenly between the two rms. Suppose each rm tries to maximize its prot, i.e., the subsidy he gets minus the cost of its e/ort. (a) Suppose & = 2 , what are the rationalizable strategies for each rm? (b) suppose & = 2 , what are the pure-strategy Nash Equilibria? 3. Suppose we make one modication on Q.1: rm 1 moves rst, i.e., it chooses h 1 . After observing h 1 , rm 2 chooses h 2 . (a) what are the strategies for both rms? (b) what are the subgames? (c) suppose & = 2 , what are the Subgame Perfect Nash Equilibria? 1...
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This note was uploaded on 02/09/2012 for the course ECON 401 taught by Professor Siyang during the Spring '11 term at Rice.

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