The following post has two assignments namely;
1.FOREGIN EXPANSION
Move has a small technology tern employed in the Boston office and outsourees the remainder of its technology needs. Voter has long advocated the substantial cost savings and better management if
Green Move were to hire well educated individuals from Eastern Europe at low wages. Privately, Viktor realizes that he would also hie to make • difference in Russia by helping the underemployed and
unemployed. The board met and agreed that Green Move should consider this as a long-term strategy and that Warn should investigate a remote technology base in Russia. Victor spoke to his friends
and believes that he has found the perfect location to lease. The govemment-owned property is large, well lit and its urban location will attract many workers.
Viktor has traveled to Russia to visit his family and to meet with the property manager. The two discuss the rich history in the area and Viktor is under the impression that the property is
available. It is not until the end of the meeting that the manager infarnis Viktor that them will be a competitive bid for the lease of the property. He instructs Viktor to said him his best offer
by the end of the week and hands him two envelopes; one addressed to a government office labeled “property lease bid” and the second addressed to the property manager labeled “facilitation.” He
explains that thatever he places in the second envelope will “lceep the process moving” and the he would hate to sec bim miss out Viktor takes both envelopes.
Questions B B.I Should Viktor provide a bid on the property lease? Should he include both envelopes? Why or why not? What are the legal and ethical considerations? B .2 Should Green Move expand its
operations in Russia?
2. Symmetric information.
Suppose insurance companies can perfectly observe
the types of insurance consumers.
i. Using the numerical values provided for a, z, pL, and pH, write down the
zero-profit condition for providing insurance to type H consumers specifying
y as a function of x.
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ii. Find the values for x and y that a type H consumer will receive from an
insurance contract in the competitive insurance market. Show your work.
iii. Find the values for c and f that a type H consumer will receive from an
insurance contract in the competitive insurance market. Show your work.
iv. Using the numerical values provided for a, z, pL, and pH, write down the
zero-profit condition for providing insurance to type L consumers specifying
y as a function of x.
v. Find the values for x and y that a type L consumer will receive from an
insurance contract in the competitive insurance market. Show your work.
vi. Find the values for c and f that a type L consumer will receive from an
insurance contract in the competitive insurance market. Show your work.
vii. Construct a well-labeled diagram with x on the horizontal axis and y on the
vertical that graphically shows how the equilibrium values of x and y are
determined for both types of consumers.
(b) Asymmetric information. Now suppose that insurance companies cannot observe
the types of insurance customers.
i. Find the values for x and y that a type H consumer will receive from an
insurance contract in a separating equilibrium (assuming that one exists).
You do not have to show your work.
ii. Find the values for x and y that a type L consumer will receive from an
insurance contract in a separating equilibrium (assuming that one exists).1
Show your work.
iii. Let nH and nL denote the numbers of type H consumers and type L consumers.
Suppose that nH = 100 and nL = 900. Is there a separating equilibrium
in the insurance market? Explain.
iv. Suppose that nH = 500 and nL = 500. Is there a separating equilibrium in