Market share. Consumers can choose between three long- distance telephone services: GTT, NCJ, and Dash. Aggressive marketing by all three companies results in a continual shift of customers among the three services. Each year, GTT loses 5% of its customers to NCJ and 20% to Dash; NCJ loses 15% of its customers to GTT and 10% to Dash; and Dash loses 5% of its customers to GTT and 10% to NCJ. Assuming that these percentages remain valid over a long period of time, what is each company's expected market share in the long run?
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- Two dermatologist practices want to merge. The price elasticity of demand for dermatology services is -0.35. Firm 1 has a volume of 7,500, fixed costs of $70,000, marginal costs of $20, and a market share of 8%. Firm 2 has a volume of 15,600, fixed costs of $65,000, marginal costs of $20, and a market share of 12 percent. The merged firm will have a volume of 21,500, fixed costs of $95,000, marginal costs of $20, and a market share of 20%. What are the total costs, prices, revenues, and profits for each firm and for the merged firm, respectively?The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market demand for dark chocolate is: P = 8 - 0.005Qd where P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output. a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw? b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh? c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a…Suppose you are the manager of a theatre company. You have identified two groups of customers. Group 1 has a demand given by Q 1 = 100 - 2P and Group 2 has a demand given by Q 2 = 120 - P. You are currently charging the same price, €40, to both groups. To maximize revenue, you should charge a price of 25 euros to group 1 and 50 euros to group 2 25 euros to group 1 and 75 euros to group 2 50 euros to group 1 and 20 euros to group 2 25 euros to group 1 and 60 euros to group 2
- According to International Data Corporation (IDC), the number of worldwide smartphone owners will soon exceed 1.5 billion. That number is expected to grow at nearly 10 percent per year for the next five years. While the actual cost of a smartphone is about $300, wireless carriers in some countries offer their customers a “free” smartphone with a two-year wireless service agreement. Is this pricing strategy rational? ExplainIn the late 1990s, Vanguard Airlines operated as a low-cost carrier, offering low prices and limited services, out of Kansas City, Missouri. Not long after its inception, Vanguard began offering a significant number of flights based out of Midway International Airport in Chicago, Illinois, as well. When Vanguard expanded to Midway, incumbent airlines, such as Delta, quickly responded to its low fares by offering many competing flights at comparably low prices. The intense price competition ultimately caused Vanguard to exit Midway in 2000 and file for bankruptcy in 2002. At varying points in time, the airline industry has been described as a contestable market; does the example of Vanguard support or refute this characterization of the airline industry? ExplainMicrosoft is the market leader in office software with its MSOffice. Its marginal cost of production c is 1 dollar per unit. Home users demand 40 million licenses and are willing to pay 50 dollars, whereas businesses demand 60 million licenses and are willing to pay 100 dollars. Microsoft also produces a home version of MS Office at a marginal cost of c'=2. Home users and businesses are willing to pay 60 and 40 dollars, respectively, for the home version. Which is the best pricing strategy for Microsoft? O Selling MSOffice Professional at 100 Selling MSOffice Home at 40 Selling MSOffice Professional units at 100 and MSOffice Home units at 40 Selling MSOffice Professional at 80 dollars and MSOffice Home at 40 dollars
- a boxing coach is setting a two-part tariff consisting of a monthly subscription fee and per-use fee for his studio. He knows that potential customers of his studio may be present biased and sophisticated or present biased and naïve. He decides to set a high monthly subscription fee and charge no fee for each use. Will such a strategy help the coach maximise profit?Suppose a drug company has a patent on a cancer drug that allows it to enjoy monopolistic rents for the life of the patent. The patent is set to expire in one year. At that point all drug companies will have access to the patent and be able to produce generic versions of the cancer drug, transforming the market for this drug in a perfectly competitive market. Suppose the market demand for the cancer drug before and after the patent expires is unchanged and given by p = 120 - 0.3Q. Suppose that all firms (the monopolist as well as the generic drug firms) face the same production cost C(Q) = 100 + 0.3Q + 0.2Q2. Question: Calculate the gain in total surplus that results when the market for the cancer drug switches from a monopolistic market to a perfectly competitive market.Suppose the European Union (EU) was investigated and proposed a 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 -1.4 and that it costs $15.90 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. Instructions: Do not round intermediate calculations. Enter your final responses rounded to the nearest penny (two decimal places). Pre-merger price: $ Post-merger price: $
- A golf club has determined that its local community has two broad groups of consumers: casual golfers and serious golfers. The golf club plans to charge golfers both a monthly membership fee (F) and a price (P) for each round of golf played. The club has estimated the following details for each consumer group, where P represents the price per round of golf and Q represents the number of rounds played each month. There are 25 serious golfers and each serious golfer has a direct demand of Qs(Ps)=190−2Ps. There are 60 casual golfers and each casual golfer has a direct demand of Qc(Pc)=152−2Pc. The marginal cost associated with each round is equal to $20.Ignore fixed costs. Assume that this golf club cannot price discriminate and must charge one price (P) and one membership fee (F). We will now determine whether it is more profitable for the golf club to select its prices based on the preferences of casual golfers or on the preferences of serious golfers. For the next two parts,…A golf club has determined that its local community has two broad groups of consumers: casual golfers and serious golfers. The golf club plans to charge golfers both a monthly membership fee (F) and a price (P) for each round of golf played. The club has estimated the following details for each consumer group, where P represents the price per round of golf and Q represents the number of rounds played each month. There are 25 serious golfers and each serious golfer has a direct demand of Qs(Ps)=190−2Ps. There are 60 casual golfers and each casual golfer has a direct demand of Qc(Pc)=152−2Pc. The marginal cost associated with each round is equal to $20.Ignore fixed costs. Assume that this golf club cannot price discriminate and must charge one price (P) and one membership fee (F). We will now determine whether it is more profitable for the golf club to select its prices based on the preferences of casual golfers or on the preferences of serious golfers. For the next two parts,…FRONT PAGE Pricing Disney+ Disney decided it wanted to provide streaming services directly to customers, rather than renting its library of films and television shows to other streaming services like Netflix. But how successful would a streaming service be? In other words, what did the demand for a "Disney+" streaming service look like? Disney knew that the number of subscribers would depend not just on the attractiveness of the Disney archives, but also on the subscription price. After doing some market research, Disney decided to launch Disney+ at a price of $6.99 a month (or $69.99 per year). When Disney+ was launched on November 12, 2019, 10 million people signed up on the first day-a resounding success! Source: News reports, October-December 2019. Suppose Disney+ changes its monthly subscription price from $7 to $9 per month. Graphically show the impact of this price change in the following markets: a. Popcorn, pizza, and other movie snacks