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Uber produces output Q, where Q is the number of rides. To produce Q, Uber needs drivers. Each Uber driver chooses how many hours H
Uber produces output Q, where Q is the number of rides. To produce Q, Uber needs drivers. Each Uber driver chooses how many hours H to work. During each hour worked, a driver can provide 4 rides. For the driver, the cost of driving H hours is 4H2. Uber pays to its driver a wage b for each ride. The driver's utility is income minus the cost of driving. Uber faces a downward sloping demand curve: P =17O - 2Q. In addition to the wage it pays to the drivers, Uber also pays for other expenses (advertising, internet access, servers, headquarters, etc.). Uber's cost is 6Q2, plus the cost of wages. Uber chooses the wage, b, that maximizes its profit, the driver chooses hours, H, that maximizes her utility, and each client pays a price P. Find Uber's profit in the SPE of this game
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