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Chapter13
Pricing and output Decisions: Strategy and Tactics:
2. Consider the following payoff matrix
Player B Strategy
$1,000
$2,000
-$2,000
-$1,000
-$1,000
-$2,000
$2,000
$1,000
Player A strategy
a. Does Player A have a dominant strategy? Explain why or why not
b. Does Player B have a dominant strategy? Explain why or why not
13. Analyze the following sequential game and advise Kodak about whether they should introduce the new product Picture CD.
New product Rival
Adverting Pricing Policy Kodak Sony
Introduction $380m $620m
High
Kodak Moderate $610m $590m
Low $560m $540
$710m $550m
Increase ads $620m $610
Sony $570 $540
Kodak introducing maintain ads $400m $720
Picture CD High
Kodak $580m $600m
Moderate
Low
Don not
Introduce
Increase ads
Sony
Maintain ads
15. A math graduate student explain to her friend how to approach a group of smart attractive guys who have brought along famous actor Russell Crowe, what should her friends do? Ignore Russell Crowe or fixate on Russell Crowe? Explain the equilibrium reasoning underlying your answers
Student 1
Ignore R.C
Fixate R.C
|
No date tonight (Worse) No date tonight |
Date with RC (Best) Data with other Guys (Better) |
|
Date with other guys (better) Date with RC (Best) |
No date ever (Worst) |
Ignore R.C
Student 2
Fixate R.C
Chapter 14 3(b, c, d), 5(a, b, c), and 8(a, b, c)
3. American Export Import Shipping Company operate a general cargo carrier service between New York and several Western European ports. Its hauls two major categories of freight, manufactured items and semi manufactured raw materials. The demand functions for these two classes of goods are
P1=100-2Q1
P2=80-Q2
Where Q1= tons of freight moved. The total cost function for American is
TC=20+4(Q1 +Q2)
a. Determine the firms total profit function
b. What are the profit maximizing levels of price output for the two freight categories?
c. At these levels of output, calculate the marginal revenue in each market
d. What are Americans total profits, if it is effectively able to charge different prices in the two markets?
5. Philip Industries manufacture a certain product that can be sold directly to retail outlet or to the Superior Company for further processing and eventual sale as a completely different product. The demand function for each of these markets is
Retail Outlet P1= 60 -2Q1
Superior Company P2 = 40- Q2
Where P1 and P2 are the price charged and Q1 and Q2 are the quantities sold in the respective markets. Philips total cost function for the manufacture of the product is
TC = 10 + 8 (Q1 + Q2)
a. Determine Philips total profit function
b. What are the profits –maximizing price and output levels for the product in the two markets?
c. At these levels of output, calculate the marginal revenue in each market
8. The Pear Computer Company just developed a totally revolutionary new personal computer. It estimate that it will take competitors at least two years to produce equivalent product. The demand function for the computer is estimated to be
P = 2,500 – 0.0005Q
The marginal ( and average variable) cost of producing the computer is $900
a. Compute the profit maximizing price and output levels assuming Pear acts as a monopolist for its product
b. Determine the total contribution to profit and fixed costs from the solution generated in part (a)
Pear Computer is considering an alternative pricing strategy of price skimming. It plnas to set the following schedule of price over the coming two years:
Time Period Price Quantity Sold
1 $2,400 200,000
2 $2,200 200,000
3 $2000 200,000
4 $1,800 200,000
5 $1,700 200,000
6 $1,600 200,000
7 $1,500 200,000
8 $1,400 200,000
9 $1,300 200,000
10 $1,200 200,000
c. Calculate the contribution to profit and overhead for each of the 10 time periods and prices.
