Nash Equilibrium and Duopoly Theory
then firm 1 will increase its action a1. The following example should help make this clearer. 1 The isoprofit curve is defined by the equation π1 (a1 a2) = k
3.3. Stackelberg Model
tangency point (S) of the isoprofit curve with the reaction curve of the follower (firm 2). (C) would be the Cournot equilibrium where the reaction curves.
Chapter 2: Input-Output Decision 1 The production set 2 Isoprofit lines
Sep 18 2018 Now that a firm's profit is represented by the isoprofit lines
Final Exam - Solutions
Jun 8 2011 Increasing the wage would have no effect on the slope of the isoprofit lines. 4. The demand curve for pineapples is downward sloping and the ...
Discussion Paper No. 948 - INFORMATION SOURCES AND
equilibrium iso-profit curve defined by by definition. To prove (ii) sloped branch of the inverse of the isoprofit curve defined by w = w°(n; x). Page 19 ...
Dumping and Double Crossing: The (In)effectiveness of Cost-Based
that both can be explained by a cost-based definition of dumping when the 3 implies that the isoprofit curves of the higher types are nested within the ...
Bargaining Models
(hw)−space is defined by setting utility to be a constant
C:UsersJimDesktopgraphical
From the system the variables y1
Comparing Bertrand and Cournot Equilibria: A Geometric Approach
(See Figure 2.) Using the isoprofit and isoquantity curves defined above we can now characterize a. Cournot equilibrium in the price space. Given the value
Principal - Agent model under screening - Microeconomics 2
Definition: Screening or adverse selection models. Also θU(A) + (1 − θ)U(B) ≥ UR(θ) (IRθ). Firm's profit on risk θ: W − θL − [θA + (1 − θ)B]. Isoprofit ...
Dumping and Double Crossing: The (In)effectiveness of Cost-Based
that both can be explained by a cost-based definition of dumping when the Isoprofit Curves and the Double Crossing Property. In the first period a.
Chapter 6 - Compensating Wage Differentials
The slope of an indifference curve is the reservation price a worker attaches to moving to a slightly riskier job. 6 - 12. Isoprofit Curves for Different. Wage-
Final Exam - Solutions
08-Jun-2011 (c) The slope of the isoprofit lines would be equal to the rental rate of ... move the firm above the current isoquant meaning they will ...
Discussion Paper No. 948 - INFORMATION SOURCES AND
For any defined collection of workers a dispersed equilibrium equilibrium iso-profit curve defined by by definition. suppose w > b.
3.3. Stackelberg Model
Industrial Organization- Matilde Machado. Stackelberg Model. 10. 3.3. Stackelberg Model. Graphically: The isoprofit curves for firm 1 are derived as:.
Equilibrium Fluctuations when Price and Delivery Lag Clear the
and regrouped to be compatible with Census SIC code definitions. I thank John Geweke for providing me In general along any isoprofit curve the quantity.
C:lecturesLaborF02Key Terms and Concepts Earnings.wpd
%20earnings.pdf
Nash Equilibrium and Duopoly Theory
1's profit depend its own action a1 ("action" is defined very broadly 1 The isoprofit curve is defined by the equation ?1 (a1 a2) = k where k is a ...
Comparing Bertrand and Cournot Equilibria: A Geometric Approach
out of the market an isoprofit curve Hi further away from the pi-axis yields higher profits. Define Qi(qi) as firm i's isoquantity curve in the price space
Bargaining Models
1 Indifference Curves and Isoprofit Curves Revisited (hw)?space is defined by setting utility to be a constant
1Chapter 6
Compensating
Wage Differentials
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinLabor Economics, 4th
edition6 - 2Introduction •The labour market is not characterised by a single wage:Workers differ and jobs differ.
•Adam Smith proposed the idea that job characteristics influence labour market equilibrium. •Compensating wage differentialsarise to compensate workers for nonwage characteristics of the job (i.e. how 'pleasant' or 'unpleasant' a job is). -If a job is unpleasant, the firm must probably offer a higher wage to attract workers and vice versa. •Workers have different preferences and firms have different working conditions. 2 6 - 36.1 The Market for Risky Jobs
•Simple model: Assume only two types of jobs in the labour market (safe jobs versus risky jobs). -Safe jobs have probability of zero that worker gets injured. Risky jobs have probability of 1! Workers know this. •Workers care about whether their jobs are safe or risky. •A worker's utility function: Utility = f (w, risk of injury) •Indifference curves reveal the trade-offs that a worker prefers between wages and degree of risk (risk assumed to be a 'bad'): To provide the same utility, risky jobs must pay higher wages than safe jobs. 6 - 4Figure 6.1: Indifference Curves Relating the
Wage and the Probability of Injury on Job
w 1 1 ˆw U 1 Wage 10Probability of
Injury
w 0 Q PU 0 w U 1The worker earns a wage of w
0 dollars and gets U 0 utils if she chooses the safe job. She would prefer the safe job if the risky job paid a wage of w' 1 dollars, but would prefer the risky job if that job paid a wage of w'' 1 dollars.The worker is indifferent
between the two jobs if the risky job pays w^ 1 . The worker's reservation priceis then given by ǻw^= w^ 1 -w 0 3 6 - 5Indifference Curves Relating the Wage and
the Probability of Injury on Job ctd. •The greater the worker's dislike for risk, the greater the bribe required for switching from a safe to a risky job, and the greater the reservation price (case of step indifference curves). •Firms have to choose which type of job to offer. Which is more profitable? -Firms may have a risky work environment because it is less expensive to pay higher wages than to make the environment safe. -As the wage firms have to offer for risky jobs increases, fewer firms will offer risky jobs (resulting in a downward sloping demand curve for such jobs, see Figure 6.2). •Reason: It becomes more profitable for firms to make jobs save than to pay the higher wage. 6 - 6Figure 6.2: Determining the Market
Compensating Differential
The supply curve slopes up
because as the wage gap between the risky job and the safe job increases, more and more workers are willing to work in the risky job.The market compensation
differential equates supply and demand, and gives the bribe required to attract the last worker hired by risky firms.Number of
Workers in
Risky JobE
S P Dw 1 -w 0 (w 1 -w 0 4 6 - 7Determining the Market Compensating
Differential ctd.
•Note the features of the equilibriumin Figure 6.2:1.The wage differential is positive. Risky jobs pay more
than save jobs.2.The equilibrium wage differential is that of the last worker
hired (the marginal worker). It is not a measure of the average dislike for risk among workers in the labour market.3.Therefore, all but the marginal worker are
overcompensated by the market! 6 - 8Can the Compensating Wage Differential go
the "Wrong" Way? •What about workers that like risk and get utility from it (e.g. racing car drivers, test pilots, explorers, undercover agents)? •Their reservation price is negative! They would pay to get a risky job even if it paid less than other jobs. •If demand for workers in risky jobs is small there could be a negative compensating wage differential for such workers (seeFigure 6.3).
•Firms might get away with paying a lower wage for risky jobs! 5 6 - 9Figure 6.3: Market Equilibrium when Some
Workers Prefer to Work in Risky Jobs
w 1 -w 0 (w 1 -w 0 0E PNumber of
Workers in Risky
JobS D N w MINIf some workers like to
work in risky jobs (they are willing to pay for the right to be injured) and if the demand for such workers is small, the market compensating differential is negative. At point P, where supply equals demand, workers employed in risky jobs earn less than workers employed in safe jobs.6 - 10
6.2 Hedonic Wage Theory
•Assume there are many types of firms (instead of just those offering safe or risky jobs). The probability of injury can take any value between 0 and 1. •Workers maximise utility by choosing wage-risk combinations that offer them the greatest amount of utility. Assume workers dislike risk, but to different degrees, i.e. they have different optimal wage-risk combinations. •Firms are on their isoprofit curves that give the risk-wage combinations that provide zero (economic) profit. They differ between firms. •A hedonic wage function reflect the relationship between wages and job characteristics. It matches workers with different risk preferences with firms that can provide jobs that match these different risk preferences. 66 - 11
Figure 6.4: Indifference Curves for Three
Types of Workers
U C U BU A WageProbability of Injury
Different workers have
different preferences for risk. Worker Ais very risk- averse. Worker Cdoes not mind risk as much.The slope of an
indifference curve is the reservation price a worker attaches to moving to a slightly riskier job.6 - 12
Isoprofit Curves for Different
Wage-Risk Job Packages
•An isoprofit curvegives all the risk-wage combinations that yield the same level of profits to a firm. •Isoprofit curves are upward sloping because production of safety is costly. •Wage-risk combinations on higher isoprofit curves yield lower profitsA wage cut shifts the isoprofit curve down.
•Isoprofit curves are concave because production of safety is subject to the law of diminishing returns. Reducing risk of job injury is at first relatively cheap, but becomes more expensive the further risk is reduced.quotesdbs_dbs4.pdfusesText_8[PDF] isoquant definition
[PDF] isoquante
[PDF] isoquante microéconomie
[PDF] isostatisme cours pdf
[PDF] isostatisme d une pièce
[PDF] isostatisme d'une piece cylindrique
[PDF] isostatisme exercices corrigés pdf
[PDF] ispa alençon
[PDF] ispa alençon avis
[PDF] ispa alençon classement
[PDF] ispa avis
[PDF] ispa classement
[PDF] ispa consulting
[PDF] ispa france
