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12 Jan 2018
6. Suppose that Congress plans to award a monopoly privilege worth $10,000,000 to whichever firm gets it. Every firm that retains a lobbying team has an equal chance of winning the privilege. It costs $100,000 to retain a lobbying team.
A. How many firms have to lobby in order to make hiring a lobbying team an even bet (expected profit=0)?
B. What does this lobbying activity do to the net monopoly profit earned by the winner? To the net profits given to the entire industry?
C. What if firms pay a bribe (or buy a lottery ticket) instead? Who, if anyone, now on net gets a monopoly profit?
6. Suppose that Congress plans to award a monopoly privilege worth $10,000,000 to whichever firm gets it. Every firm that retains a lobbying team has an equal chance of winning the privilege. It costs $100,000 to retain a lobbying team.
A. How many firms have to lobby in order to make hiring a lobbying team an even bet (expected profit=0)?
B. What does this lobbying activity do to the net monopoly profit earned by the winner? To the net profits given to the entire industry?
C. What if firms pay a bribe (or buy a lottery ticket) instead? Who, if anyone, now on net gets a monopoly profit?
glorysoft2Lv10
28 Sep 2022
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Jamar FerryLv2
13 Jan 2018
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