"Law and Economics"

Participation in this forum has to comply with a few rules:

• Contributions which do not deal with topics like "economics analysis of law" or "economic policy" will be deleted.
• You do not have to register with forum romanum.
• For a registration, you need a working Email address.
• No one has a right that his contribution will be (or remains) posted.
• The ForumMaster reserves the right to delete contributions at his own discretion.
• All contributions reflect only the personal opinion of their author.
• If you participate, you implicitly declare that you agree with these rules.

efficient breach (c(p)-line and optimal i*)

by Kristin on 01 Feb. 2010 15:17 Hey, my first question is regarding slide 75 and the term for the optimal investment: i*=argmax {2[p-100+200-p-i+v(i)]/3+(250-100-c+p-p-i+c)/3} I don´t really know, why we include B´s valuation v(i) here in the first part. His valuation is 200 if I am right, isn´t it? The second question is also related to this topic on slide 77. I understand the derivation of the term c(p)=3p-210, but I do not understand the meaning of it. What does it tell us? Prof. Kirstein depicted a graph to this topic with the compensation on the vertical and the price on the horizontal axis. We compared the line with the 45° line, indicating the "original situation" as I wrote down. What does it mean, that the line starts in the negative part and what is meant with "original situation"? Thanks for any helping comments. Web search, Forum search for efficient breach c p line opti ...