Why are 'network effects' considered to be a source of market power? O Because network effects allow firms to better differentiate themselves. O Because such firms can better control the supply chain networks associated with their products. O Because network effects can directly lower marginal cost. O Because network effects allow firms to price discriminate. O None of the above. O No Answer

Why are 'network effects' considered to be a source of market power? O Because network effects allow firms to better differentiate themselves. O Because such firms can better control the supply chain networks associated with their products. O Because network effects can directly lower marginal cost. O Because network effects allow firms to price discriminate. O None of the above. O No Answer

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter18: Asymmetric Information

Section: Chapter Questions

Problem 18.4P

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Two firms, Firm 1 and Firm 2, compete by simultaneously choosing prices. Both firms sell an identical product for which each of 100 consumers has a maximum willingness to pay of $40. Each consumer will buy at most 1 unit, and will buy it from whichever firm charges the lowest price. If both firms set the same price, they share the market equally. Costs are given by c; (q) = 16q;. Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Answer the following: a) If Firm 1 chooses pi = 32, Firm 2's best response is to set what price? b) If Firm 2 chooses the price determined in the previous question, Firm 1's best response is to choose what price? c) If Firm 1 chooses pi = 9, Firm 2's best response is a range of prices. What is the lowest price in this range? d) Now suppose both firms are capacity-constrained: Firm 1 can produce at most 42 units, and Firm 2 can produce at most 44 units. If firms set different prices,…
The simple case of pricing with market power assumes (a) all consumers are charged the same price, (b) the firm sells one product, and (c) demand exists in one time period. Discuss what happens as each assumption is relaxed.
QUESTION 47 Cartels are unstable due to all of the following factors except which one? incentive for each firm to serve as the whistle-blower entry of new firms into the market trade groups incentive to act in self-interest QUESTION 48 Under the merger guidelines written by the DOJ and FTC a merger may not be challenge if: There is significant foreign competition The firms involved have monetary problems There is an emergence of new technology All of the statements associated with this question are correct QUESTION 49 The existence of any consumer surplus in the market suggests that all of the following practices are possible in the market except which one? first-degree price discrimination a single price is charged to all consumers second-degree price discrimination third-degree price discrimination QUESTION 50 In peak-load pricing, the short-run marginal cost is equal to the marginal cost of providing capacity. True False.
The average consumer at a firm with market power has an inverse demand function of P = 10 − Q. The firm's total cost function is C = 2Q. If the firm engages in two-part pricing, what is the optimal price to charge a consumer for each unit purchased? Multiple Choice $2 $0 $1 $4
Answer bunk true false Determine if the statements are true or false and label each accordingly. You are currently in a labeling module. Turn off browse mode or quick nav, Tab to items, Space or Enter to pick up, Tab to move, Space or Enter to drop. The invisible hand leads to firms charging a price that is equal to marginal cost in both competitive and noncompetitive markets.In order for the invisible hand to work, prices have to be accurate signals.The invisible hand principle is that self‑interest is often aligned with social interest.The invisible hand principle works particularly well for goods associated with externalities.The invisible hand suggests that government should play an active role in deciding what goods and services should be produced.
During 2001, many European markets for mobile phones reached saturation. Because of this, mobile phone operators started to shift their focus from growth and market share to cutting costs. One way to do this is to reduce spending on international calls. These calls are routed through network operating companies called carriers. The carriers charge per call-minute for each destination, and they often use a discount on total business volume to price their services. A mobile phone operator must decide how to allocate destinations to carriers.V-Mobile, a mobile phone operator in Denmark, must make such a decision for a T-month planning horizon when it has C carriers to choose from, D destinations for its customers’ calls, and there are I price intervals for a typical carrier. (These intervals define a carrier’s discount structure.) The inputs include the following: The price per call-minute for destination d from carrier c in price interval i in month t The (forecasted) number of…
During 2001, many European markets for mobile phones reached saturation. Because of this, mobile phone operators started to shift their focus from growth and market share to cutting costs. One way to do this is to reduce spending on international calls. These calls are routed through network operating companies called carriers. The carriers charge per call-minute for each destination, and they often use a discount on total business volume to price their services. A mobile phone operator must decide how to allocate destinations to carriers.V-Mobile, a mobile phone operator in Denmark, must make such a decision for a T-month planning horizon when it has C carriers to choose from, D destinations for its customers’ calls, and there are I price intervals for a typical carrier. (These intervals define a carrier’s discount structure.) The inputs include the following: The price per call-minute for destination d from carrier c in price interval i in month t The (forecasted) number of…
You have three tickets to a Celtics game on a night that you are going to be out of town (so the value of unsold tickets is zero to you). There are only four possible buyers of a Celtics ticket. The table below lists the respective reservation prices of these four possible buyers: Customer Reservation Price 1 $25 2 $35 3 $50 4 $60 You consider inviting bids using an English auction to sell your tickets. How much total revenue can you generate using the English auction mechanism from the sale of the three tickets? [Bids can be made in increments of $1.00]
Price competition between firms, from the firms’ perspective, can be similar to the prisoners’ dilemma. The best outcome for all firms would be for all to charge a high price. However, if the other firms charge a high price, any individual firm has incentives to charge a low price and steal the market. Additionally, if any other firm chooses a low price, each firm should charge a low price too so that it doesn’t get priced out of the market. Explain how price-matching (firms announcing a policy where they match the lowest price a customer can find or will honor a competitor’s coupon) can help firms avoid the Nash equilibrium in which they all charge a low price. Is it misleading for a firm to advertise price-matching as being beneficial to consumers? (Hint: What outcomes of the game are ruled out by the price-matching policy? How does ruling out these outcomes change the game and the decision the firms face?)
Price competition between firms, from the firms’ perspective, can be similar to the prisoners’ dilemma. The best outcome for all firms would be for all to charge a high price. However, if the other firms charge a high price, any individual firm has incentives to charge a low price and steal the market. Additionally, if any other firm chooses a low price, each firm should charge a low price too so that it doesn’t get priced out of the market. Explain how price-matching (firms announcing a policy where they match the lowest price a customer can find or will honor a competitor’s coupon) can help firms avoid the Nash equilibrium in which they all charge a low price. Is it misleading for a firm to advertise price-matching as being beneficial to consumers? What outcomes of the game are ruled out by the price-matching policy? How does ruling out these outcomes change the game and the decision the firms face?
The pricing model for iTunes has been to price songs individually. In contrast, Spotify opted to offer unlimited song playing for a monthly fee. True or False: Spotify's pricing model will likely yield more profit if the value that individuals attach to songs varies greatly across songs and across different people. True False
The monopoly supply curve is the Group of answer choices - same as the competitive market supply curve. - portion of marginal costs curve where marginal costs exceed the minimum value of average variable costs. - result of market power and production costs. - none of the above