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janboone / applied-economics

course material for the course applied economics
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Question on market power assignment #31

Closed lindapelzer closed 3 years ago

lindapelzer commented 4 years ago

Hi,

Sorry for the late request on this assignment, but in the last question I won't succeed in returning the profit maximizing price. I did the following:

I tried: price_m = optimize.fsolve(lambda x: profit(x,valuations,number_of_goods),130) print("{0: .2f}".format(price_m[0])) -> this gave a price of 0, which does not match with the graph (price of about 130) nor my intuition.

janboone commented 4 years ago

No problem that the question is a bit late.

The code that you used was:

price_m = optimize.fsolve(lambda x: profit(x,valuations,number_of_goods),130)

fsolve tries to find a value for x such that profit equals 0. But this is not what we are looking for here.

We want to maximize profits (minimize minus profits); hence code should be something like:

price_m = optimize.fmin(lambda x: -profit(x,valuations,number_of_goods),130)

Does this give better results?

lindapelzer commented 4 years ago

Yes it did! Thanks.