Firm A considers acquiring an asset from firm B. The value v of the asset under...
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Firm A considers acquiring an asset from firm B. The value v of the asset under the management of firm B is uniformly distributed between $0 and $100. Firm B knows the value v, but A only knows that v is uniformly distributed between $0 and $100. If firm A takes over the asset, the asset value would increase from v to 1.5v. For example, if the asset is currently worth $50, it would be worth $75 after firm A takes over. Firm A makes a single take-it-or-leave-it offer p for the asset, which firm B accepts or rejects. If offer p is accepted, firm A gets 1.5v - p and firm B gets p. If an offer is rejected, firm A gets 0 and firm B keeps v. (a) [3] What's the maximal price that firm A is willing to pay before making any offers? (b) [4] Suppose firm A makes an offer p = $60 and it is accepted. What's the maximal price that firm A is willing to pay after learning that firm B accepts the offer of p= $60? Firm A considers acquiring an asset from firm B. The value v of the asset under the management of firm B is uniformly distributed between $0 and $100. Firm B knows the value v, but A only knows that v is uniformly distributed between $0 and $100. If firm A takes over the asset, the asset value would increase from v to 1.5v. For example, if the asset is currently worth $50, it would be worth $75 after firm A takes over. Firm A makes a single take-it-or-leave-it offer p for the asset, which firm B accepts or rejects. If offer p is accepted, firm A gets 1.5v - p and firm B gets p. If an offer is rejected, firm A gets 0 and firm B keeps v. (a) [3] What's the maximal price that firm A is willing to pay before making any offers? (b) [4] Suppose firm A makes an offer p = $60 and it is accepted. What's the maximal price that firm A is willing to pay after learning that firm B accepts the offer of p= $60?
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Answer rating: 100% (QA)
ANSWERS a The maximal price that firm A is willing to pay before making any offers is 100 b ... View the full answer
Related Book For
Business Statistics a decision making approach
ISBN: 978-0133021844
9th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
Posted Date:
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