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2. Emma's Junkers has a monopoly on used vehicles in Willimantic, CT. She has installed secret microphones around the showroom, resulting in her friendly salesperson
2. Emma's Junkers has a monopoly on used vehicles in Willimantic, CT. She has installed secret microphones around the showroom, resulting in her friendly salesperson employees being able to learn each customer's exact willingness to pay. This allows her to practice first degree price disrimination. The inverse demand function for vehicles in Willimantic is p = 6000 4. Emma purchases her stock of vehicles at an auction in Hartford for 1200 each. a. How many cars will Emma sell, and what will her total profits be? b. Willimantic City Council decides to care and so passes legislation requiring Emma to sell each car at a uniform price (Emma chooses the price). How many vehicles will she sell, what is the price, and what are her profits? c. Considering total surplus, is the town made better or worse off by Willimantic City Council's action? 3. For the following described games, draw them and solve for the NE and SPNE. Suppose we limit the payoff function for player 1 is u(m;) = my, where m; is the money player 1 keeps. The payoff function for player 2 is u(my) = m,, where ms is the amount of money player 2 receives. a. Consider a game where player 1 makes an offer of any amount between and including $0 to $10 to player 2, which they must accept. The amount not offered to player 2 goes to player 1. The game then ends. b. Consider the same game above, however player 2 can accept or reject the offer. The game then ends. c. Suppose we observe (as is the case empirically) that player 1 offers an amount above your solutions in (a.) and (b.). What can we conclude from this observation
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