Isabella runs an IT solutions business for her college peers and has only one competitor, Franco.Isabella and Franco have decided to collude andprovide monopoly-level output. Given that theyare both freshmen and intend to run their businesses for the next three years, is this agreementsustainable? Would your answer change if Francoknew he planned to transfer to another collegenext year?

Isabella runs an IT solutions business for her college peers and has only one competitor, Franco.Isabella and Franco have decided to collude andprovide monopoly-level output. Given that theyare both freshmen and intend to run their businesses for the next three years, is this agreementsustainable? Would your answer change if Francoknew he planned to transfer to another collegenext year?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 1E

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Company A and Company B are competing oligopolists. Both companies are considering increasing or maintaining their prices The payoff matrix shows the profits of the companies in millions based on their possible actions. Company B Increase Price Maintain Price Company A Increase Price $50, $40 $35, 530 Maintain Price 555, $45 $60, $35 The government offers a $5 milon subsidy to maintain current pricing. What is the expected outcome of the new payoff matrix, given the subsidy? The Nash equilibrium changes, and both companies will maintain their prices O The Nash equilbrium changes, and both companies will increase their prices O The Nash equilibrium remains the same, and both companies will increase their prices O Company A wit increase its price, whie Company B maintains its price. O Company A will maintain its price, while Company Bincreases ts price.
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Evidence of domination Both the Competition Commission and Icasa found, in their inquiries, that Vodacom and MTN are dominantacross the supply chain. Their dominance is even more entrenched by the spectrum-sharing deals that they haveentered into with Cell C, Liquid Intelligent Technologies and Rain. Cell C is wholly reliant on MTN and Vodacomto provide mobile services, and Liquid and Rain are disincentivised from competing aggressively in the mobilemarket due to the lucrative deals they have struck to provide capacity to either Vodacom or MTN, or both. Thishas limited their ability to compete independently – leaving Telkom as the only entity in the position to be able tochallenge the “cosy” market structure head-on.The economic argument being expressed in this extract is that of __________ and has the consequence of______________.a) Market failure, externalities.b) Government failure, public goods being under-produced.c) Market failure, inefficient allocation of resources.d)…
What are oligopolists said to be doing when they determine price and output decisions jointly? O corroborating combining coexisting ) colluding
In recent years bubble tea has become a craze among Singaporean consumers, leading tomany new firms entering this market either as new Singaporean startups or as establishedfirms from aboard. There are now over 50 competitors in Singapore each of which sell theirown variations of bubble tea with different flavours, colours, ingredients and packaging.Using the theory and models of market structure, examine this industry. Should governmentbe worried about any aspect of how an industry with this market structure will perform?
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Using words, not diagrams or equations, explain how a Stackelberg industry leader differs from a Cournot Oligopolist. Specifically, explain why a Stackelberg leader can earn higher profits and control a larger share of the market. Finally, identify a company that you think may have the ability to be a Stackelberg leader in its industry.
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One of the predictions of the oligopoly model is that: non-price competition is uncommon and price-cutting competition among rivals is common. O prices tend to remain relatively stable despite short-run fluctuations in market demand. the firms' costs of production (raw material, labor, advertising) remain constant over time. only one buyer (monopsony) will result in the long run. MacBook Pro -> G Search or type URL %23 3 4. 7 8 W R Y
In situations where it is relatively easy for rivals to readily duplicate the successful features of a company's product or quickly imitate its maneuvers in the marketplace to boost sales, the only dependable path to durable competitive advantage is to Copyright by C-Bus Software Inc. Copying, distrbung, or 3rd party website posting sexpressly prohibided and conatulescht valation outexecute copycat rivals by developing a collection of resources and capabilities that enables the company to perform certain important value chain activities either with greater cost efficiency or with greater differentiating effectiveness. O do a better job of empowering employees and flattening the organization structure. shift to a strategy requiring different skills, competitive capabilities, and operating methods. O outcompete them by investing heavily in R&D to try to discover ways to build competencies and capabilities faster and cheaper than rivals. O outcompete them by lowering the cost of…
Assume Boeing Inc. (of the United States) and Airbus Industrie (of Europe) rival for monopoly profits in Turkey's aircraft market. Suppose the two firms face identical cost and demand conditions, as seen in the figure below. Figure: Strategic Trade Policy: Boeing vs. Airbus $/Millions 16 14 12 10 8 MCo(no subsidy 6. MC I(subsidy) MR Demand 8 10 12 14 16 a) Referring to the above figure, assume that Boeing is the first to enter the Turkish market. Without a govemmental subsidy, the firm maximizes profits by selling aircraft at a price of $ and realizes profits totaling $_ b) Consider the figure. At the monopoly price as established by Boeing, Turkish consumers realize $ of consumer surplus from the availability of aircraft. ) Consider the figure. Suppose the European government provides Airbus a subsidy of $4 million on each aircraft manufactured, and that the subsidy convinces Boeing to exit the Turkish market. As the monopoly seller, Airbus maximizes profit by selling_ aircraft at a…