~ There is a mass one of buyers with private values v F[0, 1] with density...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
~ There is a mass one of buyers with private values v F[0, 1] with density f, and a mass one of sellers with private costs c~ G[0, 1] with density g. An intermediary designs a mechanism (PB(7), Ps(C), tв(0), ts(c)) that maps reports into trading probabilities and transfers for the buyer and sellers, where PB, Ps € [0, 1] and tp, ts € R. The agents' utilities from the mechanism are uB = VPB - tв and us=ts - cps, and their outside option is zero. The intermediary makes profit T=tBts. Additionally, the market must balance, so [ PB(v)dF (v) = [ ps(c)dG(c) Throughtout this question assume buyery and seller è get no utility, as in the profit-maximizing mechanism. (a) Given IR and IC, what is the expected utility of the buyer and seller? (b) What is the expected welfare of society and the expected profit of the intermediary? (1) (c) What is the welfare maximizing allocation given the market must balance (1)? (d) Assume v, c~ U[0, 1]. What is expected welfare and expected profit under the welfare maxi- mizing allocation? 1-F(v) f(v) (e) Assume that MR(v) = v - is increasing in v and MC(c) = c + G is increasing in c. g(c) What is the profit maximizing allocation given the market must balance (1)? (f) Assume v, c~ U[0, 1]. What is expected welfare and expected profit under the profit maximizing allocation? ~ There is a mass one of buyers with private values v F[0, 1] with density f, and a mass one of sellers with private costs c~ G[0, 1] with density g. An intermediary designs a mechanism (PB(7), Ps(C), tв(0), ts(c)) that maps reports into trading probabilities and transfers for the buyer and sellers, where PB, Ps € [0, 1] and tp, ts € R. The agents' utilities from the mechanism are uB = VPB - tв and us=ts - cps, and their outside option is zero. The intermediary makes profit T=tBts. Additionally, the market must balance, so [ PB(v)dF (v) = [ ps(c)dG(c) Throughtout this question assume buyery and seller è get no utility, as in the profit-maximizing mechanism. (a) Given IR and IC, what is the expected utility of the buyer and seller? (b) What is the expected welfare of society and the expected profit of the intermediary? (1) (c) What is the welfare maximizing allocation given the market must balance (1)? (d) Assume v, c~ U[0, 1]. What is expected welfare and expected profit under the welfare maxi- mizing allocation? 1-F(v) f(v) (e) Assume that MR(v) = v - is increasing in v and MC(c) = c + G is increasing in c. g(c) What is the profit maximizing allocation given the market must balance (1)? (f) Assume v, c~ U[0, 1]. What is expected welfare and expected profit under the profit maximizing allocation?
Expert Answer:
Answer rating: 100% (QA)
a The expected utility of the buyer and seller can be calculated as follows For the buyer the expect... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
Students also viewed these economics questions
-
1. How strong are the competitive forces confronting J. Crew in the market for specialty retail? Do a [Michael Porter] five-forces analysis to support your answer. (see chapter 3 in the textfor...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
1. The weak base methylamine, CH3NH2, reacts with water according to the equation: CH3NH (aq) + HO (1) OH(aq) + CHNH3+ (aq) Kb = 4.2 x 10-4 Calculate the equilibrium hydroxide ion concentration in a...
-
Suppose that a telephone switchboard of some company on the average handles 300 calls per hour, and that the board can make at most 10 connections per minute. Using the Poisson distribution, estimate...
-
Use a series of two-dimensional (two-variable) graphs to illustrate the historical relationship among the following variables: value of the dollar, oil prices, interest rates, and stock prices. Give...
-
Cities like San Francisco and New York that require a driver to buy a city-issued taxi medallion before the driver can legally operate a taxi are shifting the supply curve for taxis to the left...
-
The Korvette concept was started and run by one person and his group of friends. How could its failure have been avoided? Was the problem one of strategy (overexpansion), or was it organizational?...
-
The teenage daughter of a recently deceased movie star inherited a number of items from her famous fathers estate. Rather than convert these assets to cash immediately, her financial advisor has...
-
3. A region has the peak-period electricity demand in MWh given by D(r) = { 40,008 rif r 64 104,000 1,000r if r64 6 Exercises for Markets Module by Metin akanyldrm where r is the wholesale price in...
-
What is the role of accounting in business?
-
Ms. Marilyn Johnson is an attorney who has her own practice located in the South Bronx on 163 Street and Morris Avenue. She specializes in immigration, divorce, and accidents. There are a number of...
-
What role does evolutionary ecology play in understanding adaptive responses of organisms to changing environmental conditions over long time scales?
-
How do ecological disturbances, such as wildfires and hurricanes, shape ecosystem structure and influence species diversity patterns?
-
what ways does habitat fragmentation exacerbate biodiversity loss and hinder species dispersal?
-
Explain the concept of antigen presentation and its significance in activating T lymphocytes?
-
How do emerging concepts like ecosystem services valuation contribute to integrating ecological principles into decision-making processes for sustainable resource management?
-
Ana likes both soda and milk. Assume that the ?more is better? principle applies to Ana; that is, she would always prefer to consume more of either good, holding the consumption of the other good...
-
After looking at the resources, explain what a spirit image is. Why might looking at a god and/or a human in terms of their spirit be helpful if you want to eliminate some of the divisions between...
-
Steve Jackson (age 51) is a single taxpayer living at 3215 Pacific Dr., Del Mar, CA 92014. His Social Security number is 465-88-9415. In 2012, Steve's earnings and income tax withholding as the...
-
Calculate the amount of the child and dependent care credit allowed for 2012 in each of the following cases, assuming the taxpayers had no income other than the stated amounts. a. William and Carla...
-
Mark owns his home and has a $250,000 mortgage related to his purchase of the residence. When his daughter went to college in the fall of 2012, he borrowed $20,000 through a home equity loan on his...
-
Rewrite the Gross-Pitaevskii equation and the mean field energy, see equations (11.2.21) and (11.2.23), for an isotropic harmonic oscillator trap with frequency \(\omega_{0}\) in a dimensionless form...
-
The energy levels of an imperfect Fermi gas in the presence of an external magnetic field \(\boldsymbol{H}\), to the first order in \(a\), may be written as...
-
Solve the Gross-Pitaevskii equation (11.2.23) in a harmonic trap for the case when the scattering length \(a\) is zero. Show that this reproduces the properties of the ground state of the...
Hope Thrive During And After The Economic Devastation 1st Edition - ISBN: 979-8351245348 - Free Book
Study smarter with the SolutionInn App