Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 16, Problem 16.3IP
To determine
The most advantageous form of bargaining position.
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Ready Foods contracts to buy two hundred carloads of frozen pizzas from Speedy Distributors. Before Ready or Speedy starts performing, can the parties call off the deal? What if Speedy has already shipped the pizzas? Explain your answers.
Price comparison services on the Internet (as well as “shopbots”) are a popular way for retailers to advertise their products and a convenient way for consumers to simultaneously obtain price quotes from several firms selling an identical product. Suppose that you are the manager of Digital Camera, Inc., a firm that specializes in selling digital cameras to consumers that advertises with an Internet price comparison service. In the market for one particular high-end camera, you have only one rival firm—The Camera Shop—with which you’ve competed for the last four years by setting prices day after day. Being savvy entrepreneurs, the ease of using the Internet to monitor rival firms’ prices has enabled you and your rival to charge extremely high prices for this particular camera. In a recent newspaper article, you read that The Camera Shop has exhausted its venture capital and that no new investors are willing to sink money into the company. As a result, The Camera Shop will discontinue…
Which of the following statements is correct?
a.
In a principal-agent model, the party who proposes the contract is called the principal.
b.
In a principal-agent model, the party who decides whether or not to accept the contract and then performs under the terms of the contract (if accepted) is called the agent.
c.
In a principal-agent model, the agent is usually the party with asymmetric (or better) information.
d.
All of the above.
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Managerial Economics: A Problem Solving Approach
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