Economics of pricing and decision making. (Seminar 1) презентация

Economics of pricing and decision making Seminar 1

The guessing game Each of you have to declare a number between 0 and 100. The winner is the person whose number is the closest to 2/3 of the average of all guesses. What is your guess?

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The guessing game Discussion Bounded rationality People do not naturally use deep levels of strategic thinking. They just think 2-3 steps ahead. Players may be fully rational, however if a player believes that all other players will say a number N>0, that player will declare N*2/3>0. If all players believe that the average guess will be high, this becomes a self-fulfilling prophecy.

The guessing game Importance of repetition When the game is repeated, the average guess eventually goes down to 0.

Q1 V W X Y Z A 9,5 8,7 5,6 3,6 9,2 B 2,5 7,6 3,5 8,5 0,8 C 7,3 1,4 5,2 4,1 9,7 D 5,0 1,6 8,9 0,0 0,9 E 4,4 3,8 9,6 2,9 1,2

Q1 V W X Y Z A 9,5 8,7 5,6 3,6 9,2 B 2,5 7,6 3,5 8,5 0,8 C 7,3 1,4 5,2 4,1 9,7 D 5,0 1,6 8,9 0,0 0,9 E 4,4 3,8 9,6 2,9 1,2

Q2 Player 1: 2q+4(1-q)=4q+3(1-q) Implies q=1/3 Player 2: 2p+5(1-p)=3 implies p=2/3

Q3 Monopoly: Perfect competition: P=100-1/2Q=20, thus Q=160 and zero profit.

Cournot: Cournot: q1=q2=53.3 P=46.6 Π1=Π2=1422

Cournot with unequal costs: Cournot with unequal costs: q1=66.6; q2=46.6 P=44.1

Stackelberg: Stackelberg: q1=80; q2=40 P=40 Π1=1600; Π2=800

Q4 Table:

Q5

Mixed strategies Mixed strategies Entrant: -1p+1-p=2p, p=1/4 Incumbent: 7q+5(1-q)=6q+8(1-q), q=3/4 Entrant: π=0.5 Incumbent: π =6.5

Q6