my assignq4

The faculty at the Smith School have started sharing their business contacts with the administration and students to help in recruiting efforts. The hope is that these business contacts will provide job leads for students, potential students for the school and possibly donations to the school. The new dean of the Office of Career Management (OCM) surveyed MBA students, undergraduates, and administration officials to determine how much value they place on these faculty contacts. These three groups represents all the members of the Smith School who receive any value from these contacts. The survey revealed that full-time MBA students (as a whole) valued the senior faculty contacts at $100 each and the junior faculty contacts at $50 each. Senior faculty contacts are often higher up in an organization and thus potentially more valuable to students and administrators. The undergraduate students (as a whole) valued both junior and senior faculty contacts at $50 each. Finally, administrators (as a whole) valued senior faculty contacts at $50 each and junior faculty contacts at $30 each. The total number of senior faculty contacts available is 100. The total number of junior faculty contacts available is 50. The Smith School plans to make these contacts available to students and administrators at no charge.

a. Draw a demand curve combining the demand curves of each of the three sets of consumers for all 150 contacts.

1. Consider a very simple "two node" model in which natural gas is produced in region A and is transported by pipeline to region B. The price of natural gas in Region B is $6 per thousand cubic feet (Mcf) and the price of transportation service from Region A to Region B is $1/Mcf. a. If the market for producing gas in region A is perfectly competitive and there is a perfectly elastic supply of transportation service what will be the equilibrium price of natural gas in Region A? b. What will happen if the government places a cap of $4/Mcf on price that producers in Region A can charge for the natural gas they produce? Discuss how your assumptions about the shape of the competitive supply curve in Region A affects your answer. 2. Now consider a more complex natural gas supply and demand system such as the one we have in North America. There are multiple gas production areas and many consuming areas that are remote from production areas and rely on pipelines to transport gas to them. a. Assume that the price of natural gas at Henry Hub (Louisiana --- a gas producing area) is $5/Mcf and assume that the price of natural gas in Los Angeles (a gas consuming area) is $4/Mcf. Explain how such a price pattern can emerge? b. What incentives are there to expand pipeline capacity from producing areas in the Western U.S. to consuming areas in the Eastern U.S. 3. The United States maintains a Strategic Petroleum Reserve (SPR) that now contains 700 million barrels of crude oil. a. What factors would you take into account to design a policy to determine when and how much oil is released from the SPR? b. How would the expected supply behavior of OPEC affect your policy design?

An electric power system has the following mix of generating capacity installed on its network which is owned by several competing generating firms: Type Marginal Operating Cost Capacity Nuclear $15/Mwh 1000 Mw Coal $25/Mwh 2500 Mw Gas $60/Mwh 1500 Mw Turbine $80/Mwh 500 Mw a. Draw the competitive supply curve for the production of electric energy on this system b. Assume that demand is 3000 Mw and is completely price inelastic in the very short run. What would be the spot price in a perfectly competitive wholesale electricity market? c. Assume that demand is 4000 Mw and is completely price inelastic in the very short run. What would be the spot price in a perfectly competitive wholesale electricity market? d. Assume that demand is 6000 Mw at a price of $80, but that 600 Mw of this demand would be willing to be curtailed for a price of $4000/Mwh or more. What is the perfectly competitive market price in this case? 2. Describe how you would use the information above regarding the attributes of the generating capacity on this system, along with information about actual market prices and supplier behavior to measure whether or not market prices suggest that generators are exercising market power. 3. In New England, spot electricity prices in Maine are often much higher than are spot electricity prices in Boston even though they are part of the same regional network. How can you explain these price differences assume that the market is perfectly competitive.

There are two customer service workers; worker i (i{1, 2}) chooses an effort level [0, ) i e to exert in helping a customer. The cost of effort is 2 1 1 1 ( ) 15 e c e for worker 1 and 2 2 2 2 ( ) 10 e c e for worker 2. The customer's satisfaction level equals the total effort that the workers exert, up to a maximum satisfaction level of 10, that is, it is equal to min{ ,10} 1 2 e e . Each worker's payoff is the difference between the customer's satisfaction level and his/her own effort cost. Consider first the game G in which the two workers choose their efforts simultaneously. (a) Write down each worker's payoff function in G. (b) Describe each worker's best response (or reaction) function in G. (c) Draw the two best response functions in the same diagram and find all the pure-strategy Nash equilibria of G. Now consider sequential versions of the interaction. In game 2 , first Player 1 (= worker 1) selects an effort level, then Player 2 (= worker 2) after observing Player 1's choice chooses her own effort level. (d) Completely describe all the pure-strategy subgame perfect equilibria of 2 . In game 3 , the sequence of events starts with those in 2 , but after Player 2 moves, Player 1 observes Player 2's choice and decides whether to exert some additional effort 1 [0, ), so that his own total effort is 1 1 e . (e) (e.1) What is a pure strategy for Player 1 in 3 ? (e.2) What is a pure strategy for Player 2? [You are free to state your answers in words, rather than in mathematical notation; but, in either case, your answers should be explicit and complete.] (e.3) Give an example of a pure strategy for Player 1 and a pure strategy for Player 2 in the special case where each effort level must be chosen from the set {3,4}, that is, when 1 2 1 e e, , {3,4}. (f) Completely describe all pure strategy subgame perfect equilibria of 3 when 1 2 e e, [0,10] (instead of [0, )) and 1 1 [0, 10 ] (instead of [0, )).