Two startups, Ultra and Soar, have develop fairly similar ridesharing apps and are competing for customers by deciding how much to advertise their app. Let Ai ≥ 0 be the advertising level of firm i. The profits of each firm depend on how much it advertises its app but also on the advertising level of its opponent A−i . The higher the advertising levels the more visibility ridesharing apps and demand increases. In particular, firm i’s profits are ui(Ai , A−i) = (90 + Ai + A−i)Ai − 2A2 i . Ultra chooses A1 first and, after observing it, Soar chooses A2.

(a) Draw the extensive form. Which are the proper subgames?
(b) Find the SPNE. How does it compare to the NE of the simultaneous move game?
(c) Is there a first-mover advantage in the market? Justify your answer

Castillo corporation, a manufacturer, reports costs for the year as follows: direct materials used $735,000 wages to line workers 510,000 office rent 26,000 indirect materials used 700,000how much is the total period costs for castillo? $735,000 $510,000 $26,000 $700,000

Consider how health insurance affects the quantity of health care services performed. suppose that the typical medical procedure has a cost of $160, yet a person with health insurance pays only $40 out of pocket. her insurance company pays the remaining $120. (the insurance company recoups the $120 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undergo.) consider the following demand curve in the market for medical care. use the black point (plus symbol) to indicate the quantity of procedures demanded if each procedure has a price of $160. then use the grey point (star symbol) to indicate the quantity of procedures demanded if each procedure has a price of $40. q d at p=$160 q d at p=$40 0 10 20 30 40 50 60 70 80 90 100 200 180 160 140 120 100 80 60 40 20 0 price of medical procedures quantity of medical procedures demand if the cost of each procedure to society is truly $160, the quantity that maximizes total surplus is procedures. economists often blame the health insurance system for excessive use of medical care. given your analysis, the use of care might be viewed as excessive because consumers get procedures whose value is than the cost of producing them.

You decide to invest in a portfolio consisting of 25 percent stock a, 25 percent stock b, and the remainder in stock c. based on the following information, what is the expected return of your portfolio? state of economy probability of state return if state occurs of economy stock a stock b stock c recession .16 - 16.4 % - 2.7 % - 21.6 % normal .55 12.6 % 7.3 % 15.9 % boom .29 26.2 % 14.6 % 30.5 %