PS 11 Student hours

Extranef 130
16 15 17 30
1 condition 1 1
Tig
Condition 2 1 lires sum 1
51
Tig

2 pt pt PE for f 1 and 2

pᵗᵗʰ pt Tk

3 E Et 7E Zi 7ᵗʰ 2

Theexpectedvalue
71 Tip Zztiz of a futuredatepositionisequaltothe
bythe
currentpossiblepositionEnmultiplied
of
probability beinginZn
whichis Tin
PluscurrentpossiblepositionZzmultiplied byTia
E Et 1 2 t Zi

remember Tpr 1 412

4 9 T
9,1 9 9,1
9H11 C 91F22 9 1 11 1 97 22
9 9 11 1 9 1 Ter
5 1
d 91 1
911 11 9
12 1 22
9 7111 1 722
1 Derive FOC

211 9734 0

3 211 912 29 0
9

From or 9 1

ThenFrom YEO Therfram Contradiction

So only 0,0 is a stationnary point

6 2 1 9
Building Hessian ff 2117913 f9 2

and fly by 6 11 97
check atpoint 10,01 PDsolocalm
g
 But it is not a
global min

2
lets take
f X 2 4 if ne
ther s
f4 2
 5 NPUDDJEPUBB
may
2
mais C condition CV

FOC α v
1
C 171 21 Eo
2 1 α
C 1211 21 2 v

LIV

Bargaining power

NPVDB 1 2
NPUDD V LV decrease if 4 2
4 From above V IVE V11 2 V
Follows an exponential distribution

Plucx P Ca a x 1 ê V exp 411α

5 E v3 at equilibrium

setting du e dx also v X we get du dx

Forintegration ardu e

E v3 dx è

fé
té
Ii dx

FÉE E
Var V x
weneedtocomputeElx.TL
2
For integration we set du é dx

ÉTÉ_dExdx
E Ex
2
hé té e d

zfxxe.tt
EEX

Var x E EX EX
Te

and varlu
Iyi

do not need the constant 21

as MLE Ê mg x L IX

or x h 2K X
mg
Xi E i
with L CE X
II e e

Ê
so h 24 x h e neux Êxi
Take the FOC wit 244 1 7 ET O

2K

En

ECX EEN x
̅
2
Var x Var x x
̅

EU and var u
1 False it may be an inflection point

2 False if islocalextremum itcan be a Corner solution atwhichthe

derivative o

3 False as before it carte a corner solution localextremum

47

5 True By definition if foisstriclty concave on then the

valuefunction is strictly concave as it gets properties from

Objectivefonction