Different divisions within a firm frequently compete for a, Microeconomics

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Different divisions within a firm frequently compete for a

Question: Different divisions within a firm frequently compete for a common resource. Suppose that divisions 1 and 2 of a given firm share a common facility F. Let y_i be the service level used by division i (i = 1:2). Division is gross benefit in terms of improved divisional earnings is given by y_i - 0.25y_i² - 0.1(y₁+ y₂).

(a) What are the equilibrium levels of y_i if the various divisions act separately?

(b) What are the optimal levels of y_i from an overall firm point of view?

(d) How can equilibrium and optimality be reconciled?

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Microeconomics: Different divisions within a firm frequently compete for a

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