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Ting (2009) - Organizational Capacity (view source)
Revision as of 21:15, 21 May 2010
, 21:15, 21 May 2010→Generalized Capacity (GC)
In both the GC and SC games:
:<math>c^o(x;x^A) = \mbox{arg } \max_c u^A(x, z(x,y,c); x^A) - k(c)\,</math>
In the first period, <math>P\,</math>'s best response to any <math>c\,</math> is <math>x^P\,</math>. <math>A\,</math> then maximizes utility by choosing <math>c_1\,</math> subject to this. However, as <math>z\,</math> is independent of <math>x\,</math> (and <math>y\,</math>), and as <math>A\,</math>'s utility is concave in <math>c\,</math>, but costs are convex, <math>A\,</math> chooses the interior maximum irrespective of <math>P\,</math>'s choice to maximize <math>z\,</math> and hence <math>u\,</math> (subject to the constraint that <math>x=x^p\,</math>). Any <math>y\,</math> can be choosen as it will have no effect.
===Specialized Capacity (SC)===
