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Individual Assignment 2

Individual Assignment 2

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Published by Pard Teekasap
This assignment is used in the Sustainable Energy and Environment Economics class taught by Dr. Pard Teekasap at Rattanakosin College for Sustainable Energy and Environment, Rajamangala University of Technology Rattanakosin
This assignment is used in the Sustainable Energy and Environment Economics class taught by Dr. Pard Teekasap at Rattanakosin College for Sustainable Energy and Environment, Rajamangala University of Technology Rattanakosin

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Published by: Pard Teekasap on Oct 29, 2010
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RAJAMANGALA UNIVERSITY OF TECHNOLOGY RATTANAKOSIN RATTANAKOSIN COLLEGE FOR SUSTAINABLE ENERGY AND ENVIRONMENT STM 6301 Sustainable Energy

and Environment Economics Individual Assignment 2 Due: Nov 13, 2010

1. Two computer firms, A and B, are planning to market network systems for office information management. Each firm can develop either a fast, high-quality system (High), or a slower, low-quality system (Low). Market research indicates that the resulting profits to each firm for the alternative strategies are given by the following payoff matrix Firm B Firm A High Low High 50, 40 55, 55 Low 60, 45 15, 20

a) If both firms make their decisions at the same time and follow maximin (low-risk) strategies, what will and outcome be? b) Suppose that both firms try to maximize profits, but that Firm A has a head start in planning and can commit first. Now what will be the outcome? What will be the outcome if Firm B has the head start in planning and commit first? c) Getting a head start costs money. (You have to gear up a large engineering team.) Now consider the two-stage game in which, first, each firm decides how much money to spend to speed up its planning, and, second, it announces which product (H or L) it will produce. Which firm will spend more to speed up its planning? How much will it spend? Should the other firm spend anything to speed up its planning? Explain

Individual assignment 2

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2. You play the following bargaining game. Player A moves first and makes Player B and offer for the division of $100. (For example, Player A co uld suggest that she take $60 and Player B take $40.) Player B can accept or reject the offer. If he rejects it, the amount of money available drops to $90, and he then makes an offer for the division of this amount. If Player A rejects this offer, the amount of money drops to $80 and Player A makes an offer for its division. If Player B rejects this offer, the amount of money drops to 0. Both players are rational, fully informed, and want to maximize their payoffs. Which player will do best in this game?

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3. The demand for bituminous coal is estimated by the following equation COAL = 12262 + 92.34FIS + 118.57FEU 48.90PCOAL + 118.91PGAS (3.51) (6.46) (7.14) ( -3.82) (3.18) 2 = 0.692 R SER = 120000 (t-statistics in parentheses) Given COAL = Sales of bituminous coal (tons per year) PCOAL = Producer Price Index for coal (Index) PGAS = Producer Price Index for natural gas (Index) FIS = Federal Reserve Board Index of iron and steel production (Index) FEU = Federal Reserve Board Index of electric utility production(Index) a) Interpret the coefficient of the equation b) Does the equation significantly fit the historical data?

Individual assignment 2

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