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. In a market there is a single firm that produces a unique product and can manipulate the price P(Q) by changing its output Q to maximise its profit. Suppose the consumers have a linear aggregated inverse demand function: P subscript D left parenthesis Q right parenthesis equals a minus b Q, and the cost function of this single firm is C left parenthesis Q right parenthesis equals c Q. a) What are the market-clearing price and quantity in this market?

Answer: Market-Clearing Price and Quantity In a market with a single firm, the market-clearing price and quantity are determined by the relationship between the demand and the cost. The demand is described by a linear aggregated inverse demand function, PD(Q)

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. In a market there is a single firm that produces a unique product and can manipulate the price P(Q) by changing its output Q to maximise its profit. Suppose the consumers have a linear aggregated inverse demand function: P subscript D left parenthesis Q right parenthesis equals a minus b Q, and the cost function of this single firm is C left parenthesis Q right parenthesis equals c Q. a) What are the market-clearing price and quantity in this market?

AnswerBot: Market-Clearing Price and Quantity In a market where there is a single firm producing a unique product that can manipulate the price P(Q) by changing its output Q, the market-clearing price and quantity is determined by the consumer’s aggregate

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. In a market there is a single firm that produces a unique product and can manipulate the price P(Q) by changing its output Q to maximise its profit. Suppose the consumers have a linear aggregated inverse demand function: P subscript D left parenthesis Q right parenthesis equals a minus b Q, and the cost function of this single firm is C left parenthesis Q right parenthesis equals c Q. a) What are the market-clearing price and quantity in this market?

Answer: Market-Clearing Price and Quantity in A Single-Firm Market The market-clearing price and quantity in a single-firm market can be found by solving the equilibrium equation of the firm and the market. The equilibrium equation of the firm states that

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Question 8 Consider a market subject to adverse selection because the product’s quality is unobservable. Sellers are privately informed about the quality of the object they sell. The quality matters for the buyers’ valuation of the product. Unfortunately, the buyers cannot observe the quality of the product. In equilibrium, buyers’ valuation is that of the average quality of the products offered in the market. In this context, sellers could disclose the quality of their products either through certification or through signaling. What can be said about the link between total surplus and the cost of such disclosure? A. Lowering the cost of certification improves total surplus. In addition, lowering the cost of signaling also improves total surplus. B. Lowering the cost of certification improves total surplus. However, it is possible that lowering the cost of signaling reduces total surplus. C. It is possible that lowering the cost of certification reduces total surplus. However, lowering the cost of signaling does improve total surplus. D. It is possible that lowering the cost of certification reduces total surplus In addition, it is also possible that lowering the cost of signaling reduces total surplus.

Answer: Summary In a market subject to adverse selection due to the unobservable quality of the product, buyers are unable to observe the quality of the product. Sellers can disclose the quality of their products either through certification or through

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Question 13 Consider the following cheap talk game. There is a sender (she) and a receiver (he). The sender observes the state of the world θ ∼ U[0, 1], which she can communicate to the receiver through a costless and unverifiable message. Given his beliefs, possibly affected by the message, the receiver choses some action a. In a given state of the world θ, if action a is taken, the receiver gets payoff that depends on the distance between θ and a, while the sender’s payoff depends on the distance between θ+b and a. As in class, assume a quadratic loss function: ur(a; θ) = −(θ−a) 2 , us(a; θ) = −(θ+b−a) 2 , where b = 1 6 . Assume that the set of possible actions that the receiver can take is discrete rather than continuous. In particular, consider the following two cases: a ∈ {0, 1} or a ∈ {0, 1 4 , 1 2 , 3 4 , 1}. In whichcase(s) does a separating equilibrium exist? A. In both cases a separating equilibrium exists. B. With a ∈ {0, 1} a separating equilibrium exists, but not with a ∈ {0, 1 4 , 1 2 , 3 4 , 1}. C. With a ∈ {0, 1 4 , 1 2 , 3 4 , 1} a separating equilibrium exists, but not with a ∈ {0, 1}. D. In neither case does a separating equilibrium exists.

Answer: Separating Equilibrium in Cheap Talk Games A separating equilibrium is a situation in which the beliefs of the sender and the receiver are different, and therefore the sender’s message is informative. In a cheap talk game, there is a

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Question 14 Consider the following cheap talk game. There is a sender (she) and a receiver (he). The sender observes the state of the world θ ∼ U[0, 1], which she can communicate to the receiver through a costless and unverifiable message. Given his beliefs, possibly affected by the message, the receiver choses some action a. In a given state of the world θ, if action a is taken, the receiver gets payoff that depends on the distance between θ and a, while the sender’s payoff depends on the distance between θ + b and a. Rather than a quadratic loss function, consider a linear loss function. That is, ur(a; θ) = −|θ − a|, us(a; θ) = −|θ + b − a| (where | · | is the absolute value). In the pooling equilibrium and in the hybrid equilibria with two messages (L and H), what would the sender’s action(s) be? A. In the pooling equilibrium, a ∗ = 1 2 . In the hybrid equilibrium with two messages, a(L) = t 2 and a(H) = 1+t 2 where t = 1 2 − 2b. B. In the pooling equilibrium, a ∗ = √ 1 2 . In the hybrid equilibrium with two messages, a(L) = q t 2 and a(H) = q 1+t 2 where t = 1 2 − 2b. C. In the pooling equilibrium, a ∗ = 1 2 . In the hybrid equilibrium with two messages, a(L) = t 2 and a(H) = 1+t 2 where t = q 1 2 − 2b. D. In the pooling equilibrium, a ∗ = √ 1 2 . In the hybrid equilibrium with two messages, a(L) = t 2 and a(H) = 1+t 2 where t = q 1 2 − 2b.

Answer: Answer The correct answer is A. In the pooling equilibrium, a ∗ = 1 2 . In the hybrid equilibrium with two messages, a(L) = t 2 and a(H) = 1+t 2 where t = 1 2 − 2b.

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Question 5 Consider a monopolistic firm and a continuum of consumer types who differ in their valuation for a given product. The firm only offers a single product, which is costless to produce. Therefore its profits is simply the share of consumers buying the product times its price. Consumers decide whether or not to buy the product. Consumers’ WTP for the product is simply their type. Hence, a consumer with type θ would be willing to pay up to θ for the product. Therefore, the share of consumers buying the product at price p is Pr(θ ≥ p). Consider the following cases: θ ∼ U[0, 1] and θ ∼ U[1, 2]. What are the consequences of the firms optimal pricing decision in each of these two cases? A. In both cases, the firm’s optimal pricing leads to a hybrid equilibrium. B. For θ ∼ U[0, 1], the firm’s optimal pricing leads to a hybrid equilibrium; for θ ∼ U[1, 2], it leads to a pooling equilibrium. C. For θ ∼ U[0, 1], the firm’s optimal pricing leads to a pooling equilibrium; for θ ∼ U[1, 2], it leads to a hybrid equilibrium. D. In both cases, the firm’s optimal pricing leads to a pooling equilibrium

Answer: Monopolistic Firm and Consumers A monopolistic firm is one that has no competition and offers a single product. When considering a continuum of consumer types who differ in their valuation for a given product, the firm’s profits are determined

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Question 4 Consider a market in which a monopolistic firm operates and can decide whether to propose a single product or a menu of products, which differ in terms of quality and price. The firm is faced to consumer who might value quality differently. In this context, what would be the effect of a regulation that would forbid the firm from offering a menu of products? A. Forcing a firm to only offer one product at one price improves consumers’ surplus. B. Forcing a firm to only offer one product at one price hurts consumers’ surplus. C. Forcing a firm to only offer one product at one price can improve or hurt consumers’ surplus, depending on the pricing strategy of the firm when it does not use screening. D. Forcing a firm to only offer one product at one price has no effect on consumers’ surplus

Answer The effect of a regulation that would forbid a monopolistic firm from offering a menu of products on consumers’ surplus depends on the pricing strategy of the firm when it does not use screening. Specifically, if the firm opts

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Question 4 Consider a market in which a monopolistic firm operates and can decide whether to propose a single product or a menu of products, which differ in terms of quality and price. The firm is faced to consumer who might value quality differently. In this context, what would be the effect of a regulation that would forbid the firm from offering a menu of products? A. Forcing a firm to only offer one product at one price improves consumers’ surplus. B. Forcing a firm to only offer one product at one price hurts consumers’ surplus. C. Forcing a firm to only offer one product at one price can improve or hurt consumers’ surplus, depending on the pricing strategy of the firm when it does not use screening. D. Forcing a firm to only offer one product at one price has no effect on consumers’ surplu

Answer: The Effect of Forcing a Monopolistic Firm to Offer a Single Product Instead of a Menu of Products Forcing a monopolistic firm to offer only one product at one price does not have a definitive effect on consumers’ surplus.

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Consider the market for second-hand cars. Cars be of three different qualities: low (L), medium (M) or high (H). The reservation utility of sellers for each type of car as well as the willingness to pay of potential buyers for each car are described in the following information: for seller low car is 400 medium car is 700 and high car is 900, for buyer low car is 200, medium car is 700 and high car is 1200. It is common knowledge that the probability for a car to be of any of the type is one third. However, the car quality is only observable to the seller. In equilibrium, which car can be sold on this market? A. It is possible for all cars to be sold on the market. B. It is only possible for low and medium cars to be sold on the market. C. It is only possible for low cars to be sold on the market. D. It is not possible for any type of car to be sold on the market

Answer The correct answer is B. It is only possible for low and medium cars to be sold on the market. In the market for second-hand cars, the reservation utility of sellers for each type of car is higher than

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Consider the following cheap talk game. There is a sender (she) and a receiver (he). The sender observes the state of the world θ ∼ U[0, 1], which she can communicate to the receiver through a costless and unverifiable message. Given his beliefs, possibly affected by the message, the receiver choses some action a. In a given state of the world θ, if action a is taken, the receiver gets payoff that depends on the distance between θ and a, while the sender’s payoff depends on the distance between θ+b and a. As in class, assume a quadratic loss function: ur(a; θ) = −(θ−a)^2 , us(a; θ) = −(θ+b−a)^2 , where b = 1/6 . Assume that the set of possible actions that the receiver can take is discrete rather than continuous. In particular, consider the following two cases: a ∈ {0, 1} or a ∈ {0, 1/4 , 1/2 , 3/4 , 1}. In which 9 case(s) does a separating equilibrium exist? A. In both cases a separating equilibrium exists. B. With a ∈ {0, 1} a separating equilibrium exists, but not with a ∈ {0, 1/4 , 1/2 , 3/4 , 1}. C. With a ∈ {0, 1/4 , 1/2 , 3/4 , 1} a separating equilibrium exists, but not with a ∈ {0, 1}. D. In neither case does a separating equilibrium exists.

Answer: Separating Equilibrium in Cheap Talk Game In a given cheap talk game, there is a sender and a receiver. The sender can observe the state of the world θ, which can be communicated to the receiver through a costless

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Consider the following cheap talk game. There is a sender (she) and a receiver (he). The sender observes the state of the world θ ∼ U[0, 1], which she can communicate to the receiver through a costless and unverifiable message. Given his beliefs, possibly affected by the message, the receiver choses some action a. In a given state of the world θ, if action a is taken, the receiver gets payoff that depends on the distance between θ and a, while the sender’s payoff depends on the distance between θ+b and a. As in class, assume a quadratic loss function: ur(a; θ) = −(θ−a) 2 , us(a; θ) = −(θ+b−a) 2 , where b = 1 6 . Assume that the set of possible actions that the receiver can take is discrete rather than continuous. In particular, consider the following two cases: a ∈ {0, 1} or a ∈ {0, 1 4 , 1 2 , 3 4 , 1}. In which 9 case(s) does a separating equilibrium exist? A. In both cases a separating equilibrium exists. B. With a ∈ {0, 1} a separating equilibrium exists, but not with a ∈ {0, 1 4 , 1 2 , 3 4 , 1}. C. With a ∈ {0, 1 4 , 1 2 , 3 4 , 1} a separating equilibrium exists, but not with a ∈ {0, 1}. D. In neither case does a separating equilibrium exists.

Answer: Separating Equilibrium A separating equilibrium is a Nash equilibrium in which the sender’s action is determined by the state of the world. In this case, the sender can send a message to the receiver that will affect the receiver’s

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Question 6 Consider the following asymmetric information setup: a programmer just developed a creative new type of app. It is unique in its genre so that the programmer can be thought of as a monopolist on the market for this new genre of app. Consumers have no use of two of these apps; each consumer buys at most one (if any). The developer could propose three versions of the app: the Basic version, the Premium version, and the Premium +. The costs of developing each app and users willingness to pay for them are described in the following information: basic: cost is 0, H type is 5 and L type is 3; premium: cost is 1, type H is 3 and type L is 2, lastly premium +: cost is 2, type H is 8 and type L is 4.Denoting p the share of low type consumers on the market, what can be said about the apps that can be proposed by the developer under an optimal pricing structure? A. Basic or Premium are never proposed. The only version ever proposed is the Premium +. B. Basic is never proposed. Premium is never the only version to be proposed; but for some p, it can be proposed along Premium +. C. Premium is never proposed. Basic is never the only version to be proposed; but for some p, it can be proposed along Premium +. D. Basic or Premium are never proposed alone; but for some p, either can be proposed along Premium +.

Answer: Asymmetric Information Setup The programmer has developed a unique app that can be thought of as a monopolist on the market. Consumers can buy at most one of these apps, and the developer can propose three versions of the

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Question 3 Consider a computer manufacturer who can produce good quality or bad quality laptops. Good quality laptops cost 800e to manufacture, while bad quality laptops cost 400e to produce. There are 1000 potential buyers of laptops. Their valuations are as follows: 1200e for a good computer and 600e for a bad computer. The firm has all the bargaining power. Consider the case in which the buyers cannot distinguish the quality of the product (lemon case), against the case in which the buyers can distinguish the quality of the product and different prices can be charged for it (screening case). The costs and valuations of laptops are common knowledge; in the lemon case, the proportion of bad laptop produced is known to the consumers. In equilibrium, which computers can be produced? A. In both the screening and lemon cases, the firm would only produce high quality laptops. B. In the lemon case, the firm would only produce good quality laptops. In the screening case, the firm would produce both types of computers. C. In the lemon case, the firm would produce both types of computers. In the screening case, the firm would only produce high quality laptops. D. In both the screening and lemon cases, the firm would produce both types of computers. Is the correct answer B or C?

Answer The correct answer is B. In the lemon case, the firm would only produce good quality laptops. In the screening case, the firm would produce both types of computers. Explanation In the lemon case, the buyers cannot differentiate the

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Question 3 Consider a computer manufacturer who can produce good quality or bad quality laptops. Good quality laptops cost 800e to manufacture, while bad quality laptops cost 400e to produce. There are 1000 potential buyers of laptops. Their valuations are as follows: 1200e for a good computer and 600e for a bad computer. The firm has all the bargaining power. Consider the case in which the buyers cannot distinguish the quality of the product (lemon case), against the case in which the buyers can distinguish the quality of the product and different prices can be charged for it (screening case). The costs and valuations of laptops are common knowledge; in the lemon case, the proportion of bad laptop produced is known to the consumers. In equilibrium, which computers can be produced? A. In both the screening and lemon cases, the firm would only produce high quality laptops. B. In the lemon case, the firm would only produce good quality laptops. In the screening case, the firm would produce both types of computers. C. In the lemon case, the firm would produce both types of computers. In the screening case, the firm would only produce high quality laptops. D. In both the screening and lemon cases, the firm would produce both types of computers. Is s c the correct answer?

Answer: Answer: C In the lemon case, the firm would produce both types of computers. In the screening case, the firm would only produce high quality laptops. Supporting Subsections The Lemon Case In the lemon case, the firm is unable

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Question 3 Consider a computer manufacturer who can produce good quality or bad quality laptops. Good quality laptops cost 800e to manufacture, while bad quality laptops cost 400e to produce. There are 1000 potential buyers of laptops. Their valuations are as follows: 1200e for a good computer and 600e for a bad computer. The firm has all the bargaining power. Consider the case in which the buyers cannot distinguish the quality of the product (lemon case), against the case in which the buyers can distinguish the quality of the product and different prices can be charged for it (screening case). The costs and valuations of laptops are common knowledge; in the lemon case, the proportion of bad laptop produced is known to the consumers. In equilibrium, which computers can be produced? A. In both the screening and lemon cases, the firm would only produce high quality laptops. B. In the lemon case, the firm would only produce good quality laptops. In the screening case, the firm would produce both types of computers. C. In the lemon case, the firm would produce both types of computers. In the screening case, the firm would only produce high quality laptops. D. In both the screening and lemon cases, the firm would produce both types of computers. Therefore, is B the correct answer?

Answer: The Correct Answer Is B The correct answer for the question is B. In the lemon case, where buyers cannot distinguish the quality of the product, the firm would only produce good quality laptops. Conversely, in the screening case,

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Question 3 Consider a computer manufacturer who can produce good quality or bad quality laptops. Good quality laptops cost 800e to manufacture, while bad quality laptops cost 400e to produce. There are 1000 potential buyers of laptops. Their valuations are as follows: 1200e for a good computer and 600e for a bad computer. The firm has all the bargaining power. Consider the case in which the buyers cannot distinguish the quality of the product (lemon case), against the case in which the buyers can distinguish the quality of the product and different prices can be charged for it (screening case). The costs and valuations of laptops are common knowledge; in the lemon case, the proportion of bad laptop produced is known to the consumers. In equilibrium, which computers can be produced? A. In both the screening and lemon cases, the firm would only produce high quality laptops. B. In the lemon case, the firm would only produce good quality laptops. In the screening case, the firm would produce both types of computers. C. In the lemon case, the firm would produce both types of computers. In the screening case, the firm would only produce high quality laptops. D. In both the screening and lemon cases, the firm would produce both types of computers.

Answer: B. In the lemon case, the firm would only produce good quality laptops. In the screening case, the firm would produce both types of computers. Cost of Producing Laptops Good quality laptops cost 800e to manufacture, while bad quality

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Explain your calculations: Question 14 presents a cheap talk game where the sender observes the state of the world θ∼U[0,1]) and communicates it to the receiver through a costless and unverifiable message. The sender’s and receiver’s payoffs depend on the distance between the action chosen by the receiver ( a) and their respective preferred states ( θ for the receiver, θ+ bfor the sender), with a linear loss function ( Ur( a;θ ) = − ∣ θ −a ∣, ​ Us(a;θ)=−∣θ+b−a∣, where b is a constant and ∣ ⋅ ∣ denotes the absolute value). The question asks about the actions the sender would advise in a pooling equilibrium and a hybrid equilibrium with two messages (L and H). A. In the pooling equilibrium, a ∗ = 1/2 . In the hybrid equilibrium with two messages, a(L) = t/2 and a(H) = (1+t)/2 where t = 1/2 − 2b. B. In the pooling equilibrium, a ∗ = 1/√2 . In the hybrid equilibrium with two messages, a(L) = sqrt(t/2) and a(H) = sqrt((1+t)/2) where t = 1/2 − 2b. C. In the pooling equilibrium, a ∗ = 1/2 . In the hybrid equilibrium with two messages, a(L) = t/2 and a(H) = (1+t)/2 where t = sqrt(1/2 − 2b). D. In the pooling equilibrium, a ∗ = 1/√2 . In the hybrid equilibrium with two messages, a(L) = t/2 and a(H) = (1+t)/ 2 where t = sqrt(1/2 − 2b).

Answer: Calculating the Pooling and Hybrid Equilibria In a cheap talk game, the sender observes the state of the world (θ~U[0,1]) and communicates it to the receiver through a costless and unverifiable message. The sender’s and receiver’s payoffs depend on

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Question 14 presents a cheap talk game where the sender observes the state of the world θ∼U[0,1]) and communicates it to the receiver through a costless and unverifiable message. The sender’s and receiver’s payoffs depend on the distance between the action chosen by the receiver ( a) and their respective preferred states ( θ for the receiver, θ+ bfor the sender), with a linear loss function ( Ur( a;θ ) = − ∣ θ −a ∣, ​ Us(a;θ)=−∣θ+b−a∣, where b is a constant and ∣ ⋅ ∣ denotes the absolute value). The question asks about the actions the sender would advise in a pooling equilibrium and a hybrid equilibrium with two messages (L and H). A. In the pooling equilibrium, a ∗ = 1/2 . In the hybrid equilibrium with two messages, a(L) = t/2 and a(H) = (1+t)/2 where t = 1/2 − 2b. B. In the pooling equilibrium, a ∗ = 1/√2 . In the hybrid equilibrium with two messages, a(L) = sqrt(t/2) and a(H) = sqrt((1+t)/2) where t = 1/2 − 2b. C. In the pooling equilibrium, a ∗ = 1/2 . In the hybrid equilibrium with two messages, a(L) = t/2 and a(H) = (1+t)/2 where t = sqrt(1/2 − 2b). D. In the pooling equilibrium, a ∗ = 1/√2 . In the hybrid equilibrium with two messages, a(L) = t/2 and a(H) = (1+t)/ 2 where t = sqrt(1/2 − 2b).

Answer: Answer: D In the pooling equilibrium, the optimal action for the sender is a* = 1/√2. In the hybrid equilibrium with two messages, the optimal actions for the sender are a(L) = sqrt(t/2) and a(H) = sqrt((1+t)/2), where t

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Question 14 presents a cheap talk game where the sender observes the state of the world ( � ∼ � [ 0 , 1 ] θ∼U[0,1]) and communicates it to the receiver through a costless and unverifiable message. The sender’s and receiver’s payoffs depend on the distance between the action chosen by the receiver ( a) and their respective preferred states ( θ for the receiver, θ+ bfor the sender), with a linear loss function ( Ur( a;θ ) = − ∣ θ −a ∣, ​ Us(a;θ)=−∣θ+b−a∣, where b is a constant and ∣ ⋅ ∣ denotes the absolute value). The question asks about the actions the sender would advise in a pooling equilibrium and a hybrid equilibrium with two messages (L and H).

Answer: Pooling and Hybrid Equilibria in Cheap Talk Games Cheap talk games involve a sender who observes the state of the world and communicates it to the receiver through a costless and unverifiable message. The sender and receiver both have

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Question 14 presents a cheap talk game where the sender observes the state of the world ( � ∼ � [ 0 , 1 ] θ∼U[0,1]) and communicates it to the receiver through a costless and unverifiable message. The sender’s and receiver’s payoffs depend on the distance between the action chosen by the receiver ( � a) and their respective preferred states ( � θ for the receiver, � + � θ+b for the sender), with a linear loss function ( � � ( � ; � ) = − ∣ � − � ∣ u r ​ (a;θ)=−∣θ−a∣, � � ( � ; � ) = − ∣ � + � − � ∣ u s ​ (a;θ)=−∣θ+b−a∣, where � b is a constant and ∣ ⋅ ∣ ∣⋅∣ denotes the absolute value). The question asks about the actions the sender would advise in a pooling equilibrium and a hybrid equilibrium with two messages (L and H).

Answer: Pooling Equilibrium In a pooling equilibrium, the sender will advise the receiver to take the action that maximizes the sender’s payoff, which is the same action that maximizes the receiver’s payoff. This action is the one that minimizes the

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Consider the following cheap talk game. There is a sender (she) and a receiver (he). The sender observes the state of the world θ ∼ U[0, 1], which she can communicate to the receiver through a costless and unverifiable message. Given his beliefs, possibly affected by the message, the receiver choses some action a. In a given state of the world θ, if action a is taken, the receiver gets payoff that depends on the distance between θ and a, while the sender’s payoff depends on the distance between θ+b and a. As in class, assume a quadratic loss function: ur(a; θ) = −(θ−a) 2 , us(a; θ) = −(θ+b−a) 2 , where b = 1 6 . Assume that the set of possible actions that the receiver can take is discrete rather than continuous. In particular, consider the following two cases: a ∈ {0, 1} or a ∈ {0, 1 4 , 1 2 , 3 4 , 1}. In which 9 case(s) does a separating equilibrium exist? A. In both cases a separating equilibrium exists. B. With a ∈ {0, 1} a separating equilibrium exists, but not with a ∈ {0, 1 4 , 1 2 , 3 4 , 1}. C. With a ∈ {0, 1 4 , 1 2 , 3 4 , 1} a separating equilibrium exists, but not with a ∈ {0, 1}. D. In neither case does a separating equilibrium exists.

Answer: C. With a ∈ {0, 1 4 , 1 2 , 3 4 , 1} a separating equilibrium exists, but not with a ∈ {0, 1} A separating equilibrium exists when the sender and the receiver have different strategies

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Suppose that the market demand for broccoli is given by Q=1000-5P and the market supply of broccoli is given by Q=4P-80 where Q is quantity per year measured in hundreds of bushels an P is price in dollars per hundred bushels. c. Since the federal government believes a diet with broccoli included is good, it decides to subsidize the price paid by the buyer. The subsidy is $45. Find the new equilibrium price/quantity combination. d. What is the total subsidy in dollars? How much in total dollars is spent on buyers on broccoli?

Answer: Equilibrium Price and Quantity of Broccoli The market demand for broccoli can be represented by the equation Q = 1000 – 5P, where Q is quantity per year measured in hundreds of bushels and P is price in dollars

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c. Since the federal government believes a diet with broccoli included is good, it decides to subsidize the price paid by the buyer. The subsidy is $45. Find the new equilibrium price/quantity combination. d. What is the total subsidy in dollars? How much in total dollars is spent on buyers on broccoli?

Answer: Equilibrium Price/Quantity Combination The new equilibrium price/quantity combination can be found by solving the market demand/supply equations with the subsidy. With a subsidy of $45, the new equilibrium price is $135, and the new equilibrium quantity is 5. The

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Ecological Nichrle

Overview of Ecological Niche An ecological niche is a role and position that a species has in its environment. It describes how an organism or population responds to the distribution of resources and competitors and how it in turn alters

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Triasic mass extinction

Triassic Mass Extinction The Triassic mass extinction (also known as the Triassic-Jurassic extinction) was a major extinction event that took place between the Triassic and Jurassic periods (around 200 million years ago). It is thought to be one of the

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Permian mass extinction

Permian Mass Extinction Summary The Permian mass extinction, also known as the Great Dying, was the largest and most severe extinction event in Earth’s history. It occurred roughly 250 million years ago and is believed to have been caused by

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Question 6 Consider the following asymmetric information setup: a programmer just developed a creative new type of app. It is unique in its genre so that the programmer can be thought of as a monopolist on the market for this new genre of app. Consumers have no use of two of these apps; each consumer buys at most one (if any). The developer could propose three versions of the app: the Basic version, the Premium version, and the Premium +. The costs of developing each app and users willingness to pay for them are described in the following table: Basic Premium Premium + Cost 0 1 2 H type 5 3 8 L type 3 2 4 Denoting p the share of low type consumers on the market, what can be said about the apps that can be proposed by the developer under an optimal pricing structure? A. Basic or Premium are never proposed. The only version ever proposed is the Premium +. B. Basic is never proposed. Premium is never the only version to be proposed; but for some p, it can be proposed along Premium +. C. Premium is never proposed. Basic is never the only version to be proposed; but for some p, it can be proposed along Premium +. D. Basic or Premium are never proposed alone; but for some p, either can be proposed along Premium +.

Answer: The Optimal Pricing Structure for the App Developer The programmer who developed the creative new type of app can be thought of as a monopolist on the market for this new genre of app. The developer could propose three

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Question 3 Consider a computer manufacturer who can produce good quality or bad quality laptops. Good quality laptops cost 800e to manufacture, while bad quality laptops cost 400e to produce. There are 1000 potential buyers of laptops. Their valuations are as follows: 1200e for a good computer and 600e for a bad computer. The firm has all the bargaining power. Consider the case in which the buyers cannot distinguish the quality of the product (lemon case), against the case in which the buyers can distinguish the quality of the product and different prices can be charged for it (screening case). The costs and valuations of laptops are common knowledge; in the lemon case, the proportion of bad laptop produced is known to the consumers. In equilibrium, which computers can be produced? A. In both the screening and lemon cases, the firm would only produce high quality laptops. B. In the lemon case, the firm would only produce good quality laptops. In the screening case, the firm would produce both types of computers. C. In the lemon case, the firm would produce both types of computers. In the screening case, the firm would only produce high quality laptops. D. In both the screening and lemon cases, the firm would produce both types of computers

Answer: In equilibrium, the firm would produce both types of computers in the lemon case, and only high quality laptops in the screening case. In the lemon case, since the buyers cannot distinguish the quality of the product, the firm

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Two players simultaneously and independently have to decide how much to contribute to a public good. If player 1 contributes x1 and player 2 contributes x2, then the value of the public good is 1 2 12 2(x x xx + + ) , which they each receive. Assume that x1 and x2 are positive numbers. Player 1 must pay a cost 2 1 x of contributing; thus player 1’s payoff in the game is 2 1 1 2 12 1 u x x xx x = ++ − 2( ) . Player 2 pays the cost of 2 2 tx so that player 2’s payoff is 2 2 1 2 12 2 u x x x x tx = ++ − 2( ) . The number t is private information to player 2; player 1 knows that t equals 2 with probability ½ and it equals 3 with probability ½. Compute the Bayesian Nash equilibrium of this game. Note that to answer this question you need to derive three contribution levels, one for player 1 and two for player 2

Answer: What is the Bayesian Nash Equilibrium of a simultaneous-move game? The Bayesian Nash Equilibrium (BNE) of a simultaneous-move game is an equilibrium outcome that is determined by each player taking into account the strategies of all other players in

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Which of these is likely to be an effect of advertising? Which of these is likely to be an effect of advertising? Shifts out the demand curve Shift out the supply curve Shifts out and rotates the demand curve All the other answers are wrong. which is correct?

Answer Shifts out the demand curve is likely to be an effect of advertising. Advertising can have a direct impact on the demand curve by creating more demand for a product or service. This is done by increasing the visibility

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What is corporate governance? What is corporate governance? The way a business is run including monitoring and supervising executive decisions in order to meet the purpose of the business and to represent interest groups The way decisions are made in a business. The method by which shareholder influence managers The way the government impacts upon firm decisions The level of taxation on business profits. which is correct?

What Is Corporate Governance? Corporate governance is a system of rules, practices, and processes by which a company is directed and managed. It includes the roles and responsibilities of the board of directors, management, shareholders, and other stakeholders, and outlines

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As a basic rule of thumb, business owners should differentiate their products as much as possible when: As a basic rule of thumb, business owners should differentiate their products as much as possible when: price competition is intense. consumers love a variety of products costs are low. costs are high.. which is correct?

Differentiating Products When Price Competition is Intense Business owners should always strive to differentiate their products when price competition is intense. This means that instead of solely competing on price, businesses should differentiate their products by emphasizing unique features, design

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A search good is a product that: A search good is a product that: is not yet available, but consumer desires for it are known. can easily be evaluated before purchase. is difficult to locate, so it takes time to find it. is produced with rare or hard-to-find inputs.. which is correct?

Answer: A Search Good is a Product that is Not Yet Available A search good is a product that is not yet available in the market but which has been identified as something that consumers would like to purchase. Search

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If firms “satisfice” this means that If firms “satisfice” this means that objectives such as profit are not maximized. short-run profits are maximized. managers are not paid enough to stop them leaving the company. losses are minimized. which is correct?

What is Satisficing? Satisficing is an economic principle that involves choosing an option that is good enough to achieve the desired goal, rather than aiming for the perfect solution. It is a combination of two words – “satisfy” and “suffice”

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