The World Cup Committee is deciding where to host their summer event. The Committee is considering three
Question:
The World Cup Committee is deciding where to host their summer event. The Committee is considering three countries: Spain (S), Russia (R), and Netherlands (N). Demands for the event in each of the three countries are given by:
PS(QS) = 120 2QS
PR(QR) = 112 2QR
PN (QN ) = 100 2QN
The marginal cost of production in each country is constant at MC = 20.
Suppose that Russia already has sufficient stadium capacity, but Spain and Netherlands must each spend 300 on stadium building in addition to any bid they submit.
a) What is the highest amount that each country is willing to bid?
b) Which country will the World Cup Committee choose to host?
c) What does the winning country bid in equilibrium?
d) What is the profit plus bid for the World Cup Committee?
e) What is the consumer surplus minus bid for the winning country?