Duopoly quantity setting firms face the market demand P=150- Q. Each firm has a marginal cost of £60 per unit. What is the Stackelberg equilibrium when Firm 1 moves first? i). Q1 =30, Q2 =30, P=90. ii). Q1 =45, Q2 =22.5, P=82.5. iii). Q1 =35, Q2 =30, P=100. iv). Q1 =40.5, Q2 =25.5, P=70.
d. What is the advantage to mixed strategies? They i). allow a player to be unpredictable. ii). allow a player to raise his maximin payoff. iii). are needed to guarantee the existence of equilibrium. iv). all of the above.
e. Lotteries A and B have the same expected value, but B has larger variance. Which of the following is true? i). some risk averse decision makers will prefer lottery A while others will prefer lottery B. ii). all risk averse decision makers will prefer lottery B to lottery A. iii). some risk neutral decision makers will prefer lottery A while others will prefer lottery B. iv). none of the above.
f. Which of the following is the present value of £1 payable in three years is: i). £1 ii). £1/(1+3r) iii). £1/(1-3r) iv). £1/(1+r)3
