Managerial Economics Final Exam Study Guide Some Conceptual Questions Explain th

Question

Managerial Economics Final Exam Study Guide Some Conceptual Questions Explain the predicrian of the Bertrand duapoly modef that both firws wlprice at marginal cost. iow does Cournot Duopoh differ? Explain how first, second, and thind degree price discrimination differ from the standard uniform pricing problem ofhe monopolist Give real world examples of bosh second and thind degree price discrimination. Explain wy the eramples accuralety depict second and third degree price discrimination. 3. Briefly axplain he logle behind backward induction, our approach to solving soquewrial (dywamic) games. Lse he diference between Counot and Stackelberg dwapoly as an example. . Briefly explain the difference in market struchure berween perfect competirion, monopolistic competition, oligopoty, dinopoly, and monopoty, and expiain why ar why not we need lo use game theory to wnderstand firms decision-making. 5. Euplain the difference between moral hazard and adverse selection. Discuss three examples of features of the labor market that can be explained as features that ameliorare moral hazard in the employer employee relationship.

Explanation / Answer

1) The Bertrand consisting of two identical firms and constant marginal cost leads to a pure strategy nash equilibrium where both firms charge price equal to marginal cost. If a firm deviates it has zero sales and thus no profit. Deviating to a lower price will lead to sales but will earn negative margin on each unit sold as price will be less than marginal cost.  

However in cournot model the nash equilibrium consists of each firm charging price greater than marginal cost and earn positive profit.

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