Simple Entrepreneurship/Microeconomic Questions - Assignment Example

However, demand will remain the same, and this situation leads to a higher equilibrium price and lower quantity. 2. The Nash equilibrium in this situation is the advertising strategy, from its definition, the Nash equilibrium is a collection of tactics, one for each player, such that each player’s strategy is best for him or her so long as all others are playing their equilibrium strategies (Walter Nicholson 224). Simply put, two people are in Nash equilibrium if one player makes the best choice; he or she can for himself or herself taking into account the other persons decision.

Neither company can make a decision on how to go about their advertising strategy without taking into consideration what the other companies’ decision on advertisement strategy is. This resembles the prisoners’ dilemma theory, which is a two person, non-zero sum, non-cooperative game, where both players (prisoners) have no incentive to change their strategy unilaterally (Walter Nicholson 260). They both have to consider the other players strategy in order to make a favorable decision. Confessing to the crime is the most reasonable play for both of players no matter what the other player chooses; therefore, it is the dominant strategy.

The same applies to this situation since, they need to look for a way of attracting more customers through advertising and not letting their opponents has the upper hand. They will thus, have to find a dominant strategy that will put them on top of their opponents without the risk of their strategy backfiring on them, based on their competitors’ choice of advertisement strategy, so as to get the most profits. 3. Calculation of regression coefficients a) Assuming that give data for x and y are: X = (6,12,7,4,2,5) and y = (2,5,14,7,8,6) Calculating the average values of x and y X_average = (6+12+7+4+2+5)/6 =6 Y_average= (2+5+14+7+8+6)/6 =7 New data sets got by subtracting the averages values from the initial values.

X’ = (6-6, 12-6, 7-6, 4-6, 2-6, 5-6) = (zero, 6, 1, -2, -4, 1) Y’ = (2-7, 5-7, 14-7, 7-7, 8-7, 6-7) = (-5,-2, 7, 0, 1, -1) Multiplication of each X’ value by each Y’ value in order. X’ Y’ = (0*-5, 6*-2, 1*-7, -2*0, -4*1, 1*-1) = (0, -12, -7, 0, -4, -1) Square of each X’ value = (0^2, 6^2, 1^2,-2^2,-4^2, 1^2) = (0, 36, 1, 4, 16, 1) Sums of X’ Y’ values and X’^2 values Sum of X’Y’= (0-12-7+0-4-1) =-24 Sum of X’^2 = (0+36+1+4+16+1) =58 Dividing the sum of X’Y’ and X’^2 Sum of X’Y’=24 Sum of X’^2= 58 Division gives=-24/58 X1 =-0.414. b) The income when a farm of 10,000 acres is farmed.

Y = -23,300+ (4.28*-0.414) + (2,345*0) + (4,670*1) =18631.77 4. a) Sketch of graph 100 80 60 40 20 0 50 100 150 200 a) The expected value of the lottery would be $50 this is because the probability of the $200 lottery is 0.25 and with this probability, it gives the expected value at $50. b) The lottery is very undesirable thus, its utility is low because it does not bring, as much profit as one desires, giving a lottery of $50 for a $200 bid is low and undesirable. c) The level of utility of the lottery is high if the person is receiving a sure pay-off of $50.

The utility is larger than the expected utility. 5. a) Matrix representation of the game Colonel Grant (Infantry 1) (Infantry1) Colonel