Problem Set 6

Due: April 2, 2015 Economics 1030

Solutions will be posted on Monday (before the problem set is due), so you

can check your answers if youd like.

Problem 1 (Buying a rm): Consider a generalized version of the buying

a rm problem:

The value,   of company to Tomasz is distributed uniformly over the

 range [   ]

Tomasz knows its true value.

You dont know true value but company is worth  times more to you

 than it is to Tomasz. (You should assume that   1)

You make a take-it-or-leave-it oer to Tomasz, which Tomasz accepts

 if and only if your oer is greater than or equal to his valuation.

You are risk neutral.

a. Assume that [ ...