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.

Part 1. Suppose that countries are not allowed to submit bids to the World Cup Committee.

a) What are the profits generated in each of the three countries?

b) Which country will the World Cup Committee choose to host?

part 2. Suppose now that countries are allowed to submit bids to the World Cup Committee.

a) What is the highest amount that each country is willing to bid? (Assume that any value is derived from consumer surplus.)

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?

3. 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?