To Describe: The firm that blinked first, under the situation, when S’s PlayStation 2(PS2) dominated game console market from 1997 − 2003 with 123 million sold out units, after which 62 percent of market was with N’s Wii. In order to achieve this spectacular growth the prices has fallen continuously from launch
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Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
- In a statement to Gillette’s shareholders, its CEO indicated, “Despite several new product launches, Gillette’s advertising-to-sales declined dramatically . . . to 7.5 percent last year. Gillette’s advertising spending, in fact, is one of the lowest in our peer group of consumer product companies.” If the elasticity of demand for Gillette’s consumer products is similar to that of other firms in its peer group (which averages –4), what is Gillette’s advertising elasticity? Is Gillette’s demand more or less responsive to advertising than other firms in its peer group? Explainarrow_forwardYou are a pricing analyst for QuantCrunch Corporation, a company that sells a statistical software package. To date, you only have one client. A recent internal study reveals that this client’s inverse demand for your software is P=1500-5Q and that it would cost you $1,000 per unit to install and maintain software at this client’s site. What is the profit that results from two-part pricing? (Hint: set the per-unit price for each unit of the software installed and maintained equal to marginal cost; and charge a fixed “licensing fee” that extracts all consumer surplus from the client)arrow_forwardYou are about to go live with a Latin music download service that will compete head-to-head with Apple's iTunes®. You will be selling digital albums of regional (Mexican/Tejano) music for $5 each, pop/rock albums for $4 each, and tropical (salsa/merengue/cumbia/bachata) for $6 each. Your servers can handle up to 33,000 downloaded albums per day, and you anticipate on the basis of national sales, revenues from regional music will be at least five times those from tropical music. You also anticipate that you will sell at least 19,000 pop/rock albums per day as a result of the very attractive $4 price. On the basis of these assumptions, how many of each type of album should you sell for a maximum daily revenue? regional music albumspop/rock music albumstropical music albums What will your daily revenue be?arrow_forward
- The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero. 1. Assume there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell, how many premium digital channel cable TV subscriptions will be sold altogether and what price will be charged when this market reaches a Nash equilibrium? 2. Under the conditions given in Question #3 of this problem, how much profit will each firm earn when this market reaches a Nash equilibrium? 3. What is the socially efficient level of digital premium channel subscriptions for this market and at what…arrow_forwardYou are the manager of a firm that charges customers $16 per unit for the first unit purchased, and $12 per unit for each additional unit purchased in excess of one unit. The accompanying graph summarizes your relevant demand and costs. a. What is the economic term for your firm’s pricing strategy? multiple choice Third degree price discrimination Fourth degree price discrimination First degree price discrimination Second degree price discrimination b. Determine the profits you earn from this strategy. $ c. How much additional profit would you earn if you were able to perfectly price discriminate?Instructions: In solving this problem, assume the firm cannot sell fractions of a unit. $arrow_forwardYou are the manager of BlackSpot Computers, which competes directly with Condensed Computers to sell highpowered computers to businesses. From the two businesses’ perspectives, the two products are indistinguishable. The large investment required to build production facilities prohibits other firms from entering this market, and existing firms operate under the assumption that the rival will hold output constant. The inverse market demand for computers is P=5900-Q , and both firms produce at a marginal cost of $800 per computer. Currently, BlackSpot earns revenues of $4.25 million and profits (net of investment, R&D, and other fixed costs) of $890,000. The engineering department at BlackSpot has been steadily working on developing an assembly method that would dramatically reduce the marginal cost of producing these high-powered computers and has found a process that allows it to manufacture each computer at a marginal cost of $500. How will this technological advance impact your…arrow_forward
- The manager of a convenience store competes in a monopolistically competitive market and buys cola from a supplier at a price of $1.25 per liter. The manager thinks that because there are several supermarkets nearby, the demand for cola sold at her store is slightly more elastic than the elasticity for the representative food store reported in Table (which is −3.8). Based on this information, she perceives that the elasticity of demand for cola sold by her store is −4. What price should the manager charge for a liter of cola to maximize profits?arrow_forwardYou are the owner of a local Honda dealership. Unlike other dealerships in the area, you take pride in your “no-haggle” sales policy. Last year, your dealership earned record profits of $1.5 million. In your market, you compete against two other dealers, and the market-level price elasticity of demand for midsized Honda automobiles is −.3. In each of the last five years, your dealership has sold more midsized automobiles than any other Honda dealership in the nation. This entitled your dealership to an additional 30 percent off the manufacturer’s suggested retail price (MSRP) in each year. Taking this into account, your marginal cost of a midsized automobile is $12,000. What price should you charge for a midsized automobile if you expect to maintain your record profits?arrow_forwardYou own a franchise of rental car agencies in Florida. You recently read a report indicating that about 80 percent of all tourists visit Florida during the winter months in any given year and that 60 percent of all tourists traveling to Florida by air rent automobiles. Travelers not planning ahead often have great difficulty finding rental cars due to high demand. However, during nonwinter months tourism drops dramatically and travelers have no problem securing rental car reservations. Determine the optimal pricing strategy, and explain why it is the best pricing strategy.arrow_forward
- Suppose the European Union (EU) is investigating a proposed merger between two of the largest distillers of premium Scotch liquor. Based on some economists’ definition of the relevant market, the two firms proposing to merge enjoyed a combined market share of about two-thirds, while another firm essentially controlled the remaining share of the market. Additionally, suppose that the (wholesale) market elasticity of demand for Scotch liquor is –1.3 and that it costs $16.20 to produce and distribute each liter of Scotch. Based only on these data, provide quantitative estimates of the likely pre- and postmerger prices in the wholesale market for premium Scotch liquor. In light of your estimates, are you surprised that the EU might raise concerns about potential anticompetitive effects of the proposed merger? Explain carefully.arrow_forwardYou are the owner of a local car dealership. Unlike other dealerships in the area, you take pride in your “no-haggle” sales policy. Last year, your dealership earned record profits of $1 million. In your market, you compete against two other dealers, and the market-level price elasticity of demand for midsized Honda automobiles is −1.5. In each of the last five years, your dealership has sold more midsized automobiles than any other dealership in the nation. This entitled your dealership to an additional 20 percent off the manufacturer’s suggested retail price (MSRP) in each year. Taking this into account, your marginal cost of a midsized automobile is $12,000. What price should you charge for a midsized automobile if you expect to maintain your record profits?arrow_forward1. Suppose you are the economic adviser of a company producing three brands of mobile phones; Nokia 10, Samsung X and iPhone Z. Suppose further that, your company currently sells 120 Units of iPhone Z at ¢800 per unit, 150 units of Samsung X at ¢800 per unit and 200 units of Nokia 10 at ¢100 per unit, but in a bid to maximize profit, the company’s managing director proposes an increase in price of Samsung X from ¢800 to ¢1000 per unit for which quantity demanded is anticipated to fall from 150 to 100 units; iPhone Z from ¢800 to ¢1200 per unit for which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from ¢100 to ¢200 per unit for which quantity demanded is expected to fall from 200 to 100 units. I. Using the mid-point formula, compute the price elasticity of demand for each brand. II. From your answer in i, what is the type and economic interpretation of each brand’s value of elasticityarrow_forward
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning