Q: The preferences of agents A and B are representable by expected utility functions such that…
A: Pareto efficient allocation is the one from which no player/agent can be made better off without…
Q: Consider a sealed-bid auction in which the seller draws one of the N bids at random. The buyer whose…
A: Sealed-bid auctions refer to auctions where other bidders do not know what others have paid for the…
Q: Few companies take the time to estimate the value of a good customer (and often spend little effort…
A: We are going to use Economic life of the cash flows approach to solve for this answer
Q: as a consultant to design an auction to sell wireless spectrum rights. The FCC indicates that its…
A: *Answer: An English Auction, also called an open cry ascending auction, begins with an auctioneer…
Q: Automated Data Processing (ADP) provides computer software and services to a host of companies,…
A: The question involves how a company train its employees and how they are vulnerable even after…
Q: Which of the following is generally true of the experiments created by Kahneman and Tversky?…
A: Daniel Kahneman and Amos Tversky, 1979 proposed that losses cause a greater emotional impact on an…
Q: Leo owns one share of Anteras, a semiconductor chip company which may have to recall millions of…
A: The stock price is the current value of stock for buyers and sellers.
Q: Tess and Lex earn $40,000 per year and all earnings are spent on consumption (c). Tess and Lex both…
A: Hi Student, thanks for posting the question. As per the guidelines I can answer the first question.…
Q: You are a bidder in an independent private auction, and you value the object at $2000. Each bidder…
A: A bidding strategy where you set an average for how much you're willing to pay for every thousand…
Q: You are a bidder in an independent private values auction, and you value the object at $4,000. Each…
A: a. When the total number of bidders is 2, then the optimal bid can be calculated as follows: Thus,…
Q: Let U(x) = 1 – e~** be the utility function of an investor. Find the Arow-Pratt risk aversion…
A: Risk aversion is the tendency of investors to prefer outcomes with low uncertainty to outcomes with…
Q: BestDeal.com and CrazySavings.com are two online retailers with free return policies. They sell the…
A: Equilibrium price is the point where both supply and demand curve intersect each other.
Q: Shimadzu, a manufacturer of precise scientific instruments, relies heavily on the efforts of its…
A: Answer-
Q: An employer has hired Freddy and the current compensation contract gives Freddy $6,600 with prob.…
A: Expected value is the sum of multiplication of value with respective probability. Expected value =…
Q: What is the expected payoff from playing ‘Y’ ? What is the expected payoff from playing ‘Z’ ?…
A: Formulas for finding the expected payoff: Expected payoff from playing ‘Y’ = θ1(A) * Payoff of…
Q: BestDeal.com and CrazySavings.com are two online retailers with free return policies. They sell the…
A: ▪︎Q- Is there an equilibrium in which Pbd =$1500? =》No, we are able to successfully deviate from any…
Q: The Federal Communications Commission (FCC) has hired you as a consultant to design an auction to…
A: The estimated starting bid or reserve price for the object being auctioned is announced by the…
Q: Paul is interested in hiring a computer programmer for his firm. He can either search for a…
A: Given information Paul is hiring Computer programmer If he hires himself, chances are for wrong…
Q: Let U(x)= x^(beta/2) denote an agent's utility function, where Beta > 0 is a parameter that defines…
A: Utility function : U = x^(B/2) Gamble that pays: X = 10 with probability 0.2 X = 50 with…
Q: You are the manager of Taurus Technologies, and your sole competitor is Spyder Technologies. The two…
A: P = 50 – Q C(Qi)=2(Qi) Unrecoverable fixed cost= $40
Q: Following is the payoff table for the Pittsburgh Development Corporation (PDC) Condominium Project.…
A: The payoff for medium complex under the strong demand can be calculated by using the following…
Q: Apple and Google are interested in hiring a new CEO. Both firms have the same set of final…
A: In game theory, a payout matrix is a table in which one player's strategies are written in rows, and…
Q: Assume you are one of the two bidders in a second-price sealed bid auction for a preserved grilled…
A: Let there be two person in the auction . Bids made by the two participants be : b1 & b2…
Q: For each of the following scenarios, determine whether the decision maker is risk neutral, risk…
A: a.) The expected value of the project can be calculated as follows: Thus, the excepted value of the…
Q: Suppose that a decision is faced with three decision alternatives and four states of nature. The…
A: The matrix looks like: S1 S2 S3 S4 Α1 18 12 15 8 Α2 15 14 10…
Q: Adam is offered a performance based wage that will be equal to $4.200 with probability 1/3 or equal…
A:
Q: Translate the following monetary payoffs into utilities for a decision maker whose utility function…
A:
Q: The indifference curves of two investors are plotted against a single portfolio budget line, where…
A: For two commodities, an indifference curve is a graph that shows the consumer's indifference curve…
Q: You are a risk-averse investor with a CRRA utility function. You are faced with the decision to…
A: Total wealth= £1000000 Returns from investing in riskless asset= 5% Risky asset which either…
Q: Following is the payoff table for the Pittsburgh Development Corporation (PDC) Condominium Project.…
A: The payoff for medium complex under the strong demand can be calculated by using the following…
Q: Indicate whether the statement is true or false, and justify your answer.A typical value function is…
A: False, because a typical value function has both the concave and convex parts.
Q: A firm's revenue R is stochastically related to the effort exerted by its employee. Effort is a…
A: Anyone working in project management has to know what degree of effort is and how it affects a…
Q: Suppose that an individual faces uncertainty regarding the return to a financial asset. The…
A: Asset Price = $1000 Return with probability (p) = 1.1 Asset return with probability (p) = 1000*1.1 =…
Q: For constants a and b, 0 < b, b 1, and expected profit E(p), the expected utility function of a…
A: Given information a and b are constant b>0 Person is risk-neutral.
Q: Suppose there are three bidders with values for the object that are independent, private and…
A: Uniform distribution In statistics, it refers to a type of probability distribution where all…
Q: Rice farming is risky and generates expected income of $100. The certainty equivalent associated…
A: Risk-averse: - it is a strategy or the nature of the person of avoiding risk involved in capital…
Q: Question 23 Select ALL that is TRUE. You may select more than one. OUtility function of a risk…
A: In a market, utility is an economic concept that is used to explain the consumer behavior and their…
Q: The FCC has hired you as a consultant to design an auction to sell wireless spectrum rights. The FCC…
A: An English Auction, also called an open cry ascending auction, begins with an auctioneer announcing…
Q: The value of a successful project is $420,000; the probabilities of success are 1/2 with good…
A: Since it is given that:Value of a successful project, given that, there is good supervision, P(B∩G)…
Q: Derive the coefficients of absolute and relative risk aversion of the following functions, and point…
A: here we calculate the coefficients of absolute and relative risk aversion of the following functions…
Q: Apple and Google are interested in hiring a new CEO. Both firms have the same set of final…
A:
Q: ollowing is the payoff table for the Pittsburgh Development Corporation (PDC) Condominium Project.…
A: The expected decision implies that the outcomes are not sure but can be expected by taking their…
Q: Consider an expected utility maximizer whose utility function is U(w), where w denotes wealth,…
A: Utility for wealth, w= 0 U (w) = U(0) = 0 Utility for wealth, w= 100,000 U (w) = U(100,000) = 1 The…
Q: Following is the payoff table for the Pittsburgh Development Corporation (PDC) Condominium Project.…
A: A payoff demand statement represents a written statement, designed in reply to a written demand…
Q: You are a hotel manager and you are considering four projects that yield different payoffs,…
A: The return from an investment that is in turn being expected by an individual is known as the…
Q: Consider the following claim: “If a decision maker prefers one given lottery that yields $x with…
A: Answer - Risk averse :- Risk-averse under which an individual is avoid taking risks
Consider a manufacturing firm with a production process that relies on some technology that is inherently random. In particular, in each month, the productivity of the firm generates a baseline level of net revenue equal to 350 (in thousands of dollars). However, the actual net revenues generated vary due to the variation in output caused by the production technology. The variation can be represented as a risky lottery, P , with the resulting changes in net revenue (in thousands of dollars) as the listed outcomes, given by
P= (.4, -50; .25, 10; .35, 50)
Now, suppose u(x)= x.2 is the utility function over net revenue (in thousands of dollars) for the firm's manager. (That is, u(350) gives the utility from 350 thousands of dollars.) The manager knows about a new technology that regulates the output so that there is no variation in productivity or net revenue. That is, if the firm buys this new technology, the resulting net revenue will be equal to 350 (thousands of dollars) with certainty (eliminating both the times when productivity is low and when it is high). However, the new technology will impose an additional cost of 2 (thousand dollars) per month.
(b) Calculate the manager's risk premium for the prospect P and use it to explain whether or not he will buy the new technology.
Step by step
Solved in 3 steps with 5 images
- BPO Services is in the business of digitizing information from forms that are filled out by hand. In 2006, a big client gave BPO a distribution of the forms that it digitized in house last year, and BPO estimated how much it would cost to digitize each form. Form Type Mix of Forms Form Cost A 0.5 $3.00 B 0.5 $1.00 The expected cost of digitizing a form is . Suppose the client and BPO agree to a deal, whereby the client pays BPO to digitize forms. The price of each form processed is equal to the expected cost of the form that you calculated in the previous part of the problem. Suppose that after the agreement, the client sends only forms of type A. The expected digitization cost per form of the forms sent by the client is . This leads to an expected loss of per form for BPO. (Hint: Do not round your answers. Enter the loss as a positive number.)As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 60 percent chance of low demand and a 40 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 400,000-400Q and P=900,000-2500, respectively. Your cost function is C(Q)=125,000+ 430,0000. How many new homes should you build, and what profits can you expect? Number of homes you should build: homesAs the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 70 percent chance of low demand and a 30 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 300,000 -450Q and P = 700,000 -325Q, respectively. Your cost function is C(Q) = 135,000 + 172,500Q. How many new homes should you build, and what profits can you expect?
- As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 40 percent chance of low demand and a 60 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 400,000 −450Q and P = 600,000 −250Q, respectively. Your cost function is C(Q) = 170,000 + 256,000Q. How many new homes should you build, and what profits can you expect? a. Number of homes you should build: _____ homes b. Profits you can expect: $Jiffy-Pol Consultants is paid $1,000,000 for each percentage of the vote that Senator Sleaze receives in the upcoming election. Sleaze’s share of the vote is determined by the number of slanderous campaign ads run by Jiffy-Pol according to the function S = 100N/(N + 1), where N is the number of ads. If each ad costs $4,900 approximately how many ads should Jiffy-Pol buy in order to maximize its profits? A) 2,853. B) 1428. C)98 D) 477.Four companies (Firm 1, 2, 3 and 4) are producing a product for the market. Each company will decide the number of products produced. You are given that • . Each firm can choose its qi. Given the quantites produced by four companies (denoted by 91, 92, 93, 94 respectively), the market price of the product is P = 400 - 91-92-93 - 94. Cost of producing one product is 20 (*Note: So the total cost for producing qi units of product is 20qi. Firm 1 and Firm 2 will first decide the quantities produced simultaneously at the beginning. After knowing 91 and 92, Firm 3 and Firm 4 will decide the quantities produced simultaneously. (a) State the strategic profiles of each firm. (b) Find all possible subgame perfect equilibrium for this games. Provide full justification to your answer.
- Suppose a firm is considering investing $20 million in a new marketing campaign. If the price is$65,000/vehicle, they estimate they would sell an additional 2,000 vehicles; If the price is $50,000/vehicle they estimate they would sell an additional 3,000 vehicles. Calculate the company’s profits under both scenarios.k : ces As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 50 percent chance of low demand and a 50 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P= 300,000-400Q and P= 500,000 -225Q, respectively. Your cost function is CQ) = 165,000+ 243,750Q. How many new homes should you build, and what profits can you expect? Number of homes you should build: homes Profits you can expect: $1You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current Salary. You look into opening a small grocery store. Suppose that the store has annual cost of $150,000 for labor, $60,000 for rent and $30,000 for equipment. There is one-half probability that revenues will be $20,000 and a half probability that revenue will be $420,000 a. WHat is your accounting and economic profit? b. Will you quit your job and try your hand at being an entrepreneur? c. Suppose the government imposes a 25 percent tax on accounting profits: this tax is only levied if a firm is earning positive accounting profits. What will your after tax accounting profit be in the low revenue case?
- You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current Salary. You look into opening a small grocery store. Suppose that the store has annual cost of $150,000 for labor, $60,000 for rent and $30,000 for equipment. There is one-half probability that revenues will be $20,000 and a half probability that revenue will be $420,000 a. In the low revenue Situation, what will your accounting profit or loss be? b. In the high revenue situation, what will your accounting profit or loss be? c. On average, how much do you expect your revenue to be?You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current Salary. You look into opening a small grocery store. Suppose that the store has annual cost of $150,000 for labor, $60,000 for rent and $30,000 for equipment. There is one-half probability that revenues will be $20,000 and a half probability that revenue will be $420,000 a. In the high revenue case? what will your average after tax Accounting profit be? hat about your average after tax economic profit? will you Want to quit your job and try your hand at being an entrepreneur? other things equal, does the imposition of the 25 percent profit tax increase or decrease the supply of entrepreneurship in the economy?You have hired a contractor to remodel your kitchen, and you have a budget of $12,000. The contractor has given you an estimate of $10,000 to complete the work. As the project progresses, however, the dollar amount continues to rise due to increasing materials costs, and, in the end, you are charged $15,000. In this case, you know that the variances were due to the increased materials costs required in order to complete the project as agreed. Sometimes, however, when you encounter a variance, whether favorable or unfavorable, you may not initially know the reason for the difference. As part of your decision making, you will need to do some analysis to determine the cause(s) for any variances you encounter so that you can account for them in future projects. With these thoughts in mind, respond to the following: Describe a time when you encountered a variance between what was planned and the end result, whether in your personal or professional life. Note: This variance could be in your…