Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 10, Problem 11PAA
To determine
The clear-cut price strategy of the given game.
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While there is a degree of differentiation between major grocery chains like Albertsons and Kroger, the regular offering of sale prices by both firms for many of their products provides evidence that these firms engage in price competition. For markets where Albertsons and Kroger are the dominant grocers, this suggests that these two stores simultaneously announce one of two prices for a given product: a regular price or a sale price. Suppose that when one firm announces the sale price and the other announces the regular price for a particular product, the firm announcing the sale price attracts 1,000 extra customers to earn a profit of $5,000, compared to the $3,000 earned by the firm announcing the regular price. When both firms announce the sale price, the two firms split the market equally (each getting an extra 500 customers) to earn profits of $2,000 each. When both firms announce the regular price, each company attracts only its 1,500 loyal customers and the firms each earn…
While there is a degree of differentiation between major grocery chains like Albertsons and Kroger, the regular offering of sale prices
by both firms for many of their products provides evidence that these firms engage in price competition. For markets where Albertsons
and Kroger are the dominant grocers, this suggests that these two stores simultaneously announce one of two prices for a given
product: a regular price or a sale price. Suppose that when one firm announces the sale price and the other announces the regular
price for a particular product, the firm announcing the sale price attracts 1,000 extra customers to earn a profit of $5,000, compared to
the $3,000 earned by the firm announcing the regular price. When both firms announce the sale price, the two firms split the market
equally (each getting an extra 500 customers) to earn profits of $2,000 each. When both firms announce the regular price, each
company attracts only its 1,500 loyal customers and the firms each earn…
While there is a degree of differentiation between major grocery chains like Albertsons and Kroger, the regular offering of sale prices by both firms for many of their products provides evidence that these firms engage in price competition. For markets where Albertsons and Kroger are the dominant grocers, this suggests that these two stores similtaneously announce one of two prices for a given product: a regular price or a sale price. Suppose that when one firm announces the sale price and the other annoucements the regular price for a particular product, the firm announcing the sale price attracts 1,000 extra customers to earn a profit of $5,000, compared to the $3,000 earned by the firm announcing the regular price. When both firms announce the sale price, the two firms split the market equally (each getting an extrs 500 customers) to earn profits of $2,000 each. When both firms announce the regular price, each company attracts only its 1,500 loyal customers and the firms each earn…
Chapter 10 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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- At a time when demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg's was quoted as saying, “. for the past several years, our individual company growth has come out of the other fellow's hide." Kellogg's has been producing cereal since 1906 and continues to implement strategies that make it a leader in the cereal industry. Suppose that when Kellogg's and its largest rival advertise, each company earns $0 billion in profits. When neither company advertises, each company earns profits of $10 billion. If one company advertises and the other does not, the company that advertises earns $52 billion and the company that does not advertise loses $2 billion. For what range of interest rates could these firms use trigger strategies to support the collusive level of advertising? Instruction: Enter your response as a percentage rounded to the nearest whole number. percentarrow_forward6arrow_forwardThe table above presents the demand schedule and profits for soft drinks. Suppose the market for soft drinks is a duopoly and the two firms in the market are Coca Cola and Pepsi. Assume Coca Cola and Pepsi make exactly the same soft drinks but with different names: Coke and Pepsi. Assume a constant marginal cost of $200 and no fixed costs. If Coca Cola and Pepsi collude, how many Cokes would Coca Cola produce? [11:52] 100 25 150 75arrow_forward
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