ECN 200C Final: ECN 200C Final Exam Version 1 Spring 2018
Document Summary
University of california, davis - department of economics. Answer all questions (total 100 points: [30 points] there are two types of individuals. Hp they face a potential loss of and they have a utility-of-money function u(m) = m . For while for individuals of type l the individuals of type h the probability of loss is. Let nh 1 be the number of h types and nl 1 the number probability of loss is of l types. The monopolist knows all of the above data but cannot tell whether any particular customer is of type h or type l (while each potential customer knows her own type). The monopolist is considering several options (refer to the following figure). H type wealth in bad state (a) [8 points] option 1: offer only contract a. Calculate the monopolist"s profits in this (b) [8 points] option 2: offer only contract b.
