A subset of e-commerce that uses social networks to assist in marketing and purchasing products is known as ________ commerce. S
1 answer:
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Answer:
The profit maximizing output level declines by 2.5 units and the price rises by $100.
Explanation:
In a monopoly market the inverse demand curve is given as,
P = 1,200 - 40Q
The marginal cost of production of the last unit is $200.
The total revenue is
=
=
The marginal revenue of the last unit is
=
= 1,200 - 80Q
At equilibrium the marginal revenue is equal to marginal price,
MR = MC
1,200 - 80Q = 200
80Q = 1,000
Q = 12.5
Putting the value of Q in the inverse demand function,
P =
P = $700
Now, if the marginal cost rises to $400,
At equilibrium the marginal revenue is equal to marginal price,
MR = MC
1,200 - 80Q = 400
80Q = 800
Q = 10
Putting the value of Q in the inverse demand function,
P =
P = $800
Answer:
a. The optimal pricing strategy will be one-shot Nash equilibrium in which “You” charge low price, “Your Rival” charge low price and then the payoff is ($0, $0)
b. Yes, the anwer will differ becuase it is not possible to sustain the collusive outcome as a Nash equilibrium because >
.
Explanation:
a. Determine your optimal pricing strategy if you and your rival believe that the new Highlander is a "special edition" that will be sold only for one year.
Note: See the attached excel file for the Representation of one shot normal for of the game played between "You" and "Your Rival" together with the payoffs.
From the attached excel file, the dominant strategy is for “You” and “Your Rival” to charge “Low Price” each. If the dominant strategy is played by “You” and “Your Rival”, the optimal pricing strategy will be one-shot Nash equilibrium in which “You” charge low price, “Your Rival” charge low price and then the payoff is ($0, $0).
b. Would your answer differ if you and your rival were required to resubmit price quotes year after year and if, in any given year, there was a 60 percent chance that Toyota would discontinue the Highlander? Explain.
When we have a year-after-year competition between “You” and “Your Rival” but with a 60 percent chance that Toyota would discontinue the Highlander, the payoffs of the firm that continue to comply with the collusive strategy of charging “High Price” by each firm under the normal trigger strategy whereby “You” and “Your Rival” agree to charge high price as long as there is no past deviation by any of the firm, otherwise charge a low price is as follows:
= $6 + $6(100% - 60%) + $6(100% - 60%)^2 + 6(100% - 60%)^2 …….
= $6 / 6% = $10
Therefore, what the firm that cheats earn today is $11 million and it earns $0 forever. The implication of this is that = $11
Therefore, the anwer will differ becuase it is not possible to sustain the collusive outcome as a Nash equilibrium because >
.