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min{2x, 3y} meaning

answer

you need 2/3 of y for 1 hour of x

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how to write minimum utility constraints

answer

x + y = 24

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minimum utility optimizing set up

answer

2x = 3y

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How to solve elasticity problems with multivariable demand functions

answer

Take out factor, put variable in the numerator, and put the entire demand function in the denominator

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How to solve elasticity problems with fraction demand functions

answer

partial derivatives of numerator and denominator

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budget equation

answer

px + py = M

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Cournot competition profit function for firm 1

answer

(profit function)q1 - q1

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nash equilibrium steps

answer

take the derivative of the profit function and substitute since q1=q2

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Monopolist profit function

answer

price*Q - cost

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monopolist profit maximization

answer

take the derivative of the profit function and solve for Q, then substitute into price

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market price and quantity

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P = MC

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MC derived from total cost

answer

take the derivative to get marginal

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dominant strategy

answer

no matter what the other player does, you can't do worse

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cartel sustainability

answer

cheating profit - coop profit <= 1/i (profit coop - profit Nash)

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vertical quality

answer

quality of a product that is the same for all customers

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joint profit function

answer

price * quantity - cost(half quantity) - cost(half quantity)

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cheating profit function

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(overall price function - quantity of cheated firm) cheater firm quantity - cheater firm cost

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nash equilibrium profit function (best response function)

answer

(price function minus quantity of other firm) * quantity of firm 1 - cost of firm 1. This is then derived and substituted

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effect of merging firms

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marginal revenue of firm 1 becomes profit of combined firm

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indifferent consumer

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believes each product is worth buying

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moral hazard

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a hidden action that benefits one party at the expense of another

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adverse selection

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one party in a negotiation has relevant info another party lacks

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grim trigger strategy

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Cooperate until opponent defect, then defect forever

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utility maximization representation

answer

u(x,y) = ax + by

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Market rate of substitution formula

answer

marginal utility x / marginal utility y

a(x^a-1)(y^b)/b(x^a)y(^b-1)

a(x^a-1)(y^b)/b(x^a)y(^b-1)

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Elasticity formula

answer

dX/dY * Y/X

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Indexes for market competition

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four-firm concentration ratio, hhi, lerner index

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5 key perfect comp assumptions

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lots of buyers and sellers, similar products, perfect info, no transaction costs, free entry

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oligopoly models

answer

cournot, stackelberg, bertrand, hotelling

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bertrand paradox

answer

with few firms and high barriers, firms price at marginal cost

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Subgame Perfect Nash Equilibrium

answer

a set of strategies that are a nash equilibrium in every subgame of the overall game

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pricing strategies

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price discrimination, price matching, two-part tariff

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Risk preferences

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risk averse, risk neutral, risk seeking

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loss aversion

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response to losses is stronger than the response to gains

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Hotelling representatoin

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product location on a line

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value of buying with hotelling model

answer

v0 = r - tx - p0

v1 = r - t(1-x) - p1

v1 = r - t(1-x) - p1

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hotelling variables

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r = quality, t = transportation, p = price

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value and location relationship in hotelling

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value from consumption is lower the farther from the location

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high t meaning

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people are frustrated with the availability of a characteristic

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indifferent consumer location

answer

set v0 equal to v1 and solve

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expected profit function

answer

probability 1(profit function 1) + probability 2(profit function 2)