1. 2. Timely strategies Cred squares High price Low price 17.5 2.5 Comfort Enter 12.5 0...

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1.   2.   Timely strategies Cred squares High price Low price 17.5 2.5 Comfort Enter 12.5 0 strategies 25.0 12.5 Don't enter 0 Timely Busines is caming $25.0 milion a year economic profit on a route on which it has a monopoly Comfort Busines is considering entering the market and operating on this route. Timely threatens to cut the price to the point at which Comfort will make no profit ift enters. Comfort determines that the payoff matrix for the game with Timely is the one shown in the table >>> The numbers given are in millions of dollars. Does Comfort believe Timely's assertion? Does Comfort enter or not? Explain Comfort believe Timely's threat because OA doos: Comfort would do the same thing is roles were reversed OB. does not Timely will charge a higher price il Comfort enters the market and a lower price if doesn't OC. does not: Timely will charge a higher price regardless of Cornfort's decision OD does it makes good economic sense Comfort the market because O A entors; it will receive profit of $12.5 million rather than 200 O B. does not enter; it will incur an economic loss OC, does not enter it will only break even if enters, and isn't worth the effort D. enters; it will receive profit of $17.5 milion rather than zero Gadgets for Sale ... or Not How come the prices of some gadgets, like the Pod, are the same no matter where you shop? No, the answer isn't that Apple illegally manages prices. In reality. Apple uses an accepted retail strategy called minimum advertised price to discourage resellers from discounting. The minimum advertised price (MAP) is the absolute lowest price of a product that resellers can advertise Marketing subsidies offered by a manufacturer to its resellers usually keep the price at or above the MAP. Stable prices are important to the company that is both a manufacturer and a retailer. If Apple resellers advertised the iPod below cost, they could squeeze the Apple Stores out of their own markets. The downside to the price stability is that by limiting how low sellers can go, MAP koops prices artificially high for at least higher than they might otherwise be with unfottered price competition Source: Sto, December 22, 2006 Why might the MAP strategy be against the social interest and benefit only the producer? The MAP strategy might be against the social interest and benefit only the producer if O A keps the price of iPods higher than without the MAP 0.2 OB further research and development is discouraged O encourages retters to sell tower more Pods OD. it discourages retailers from discounting

 · Answer

Answer 1.

1. c. does not, Timmy will charge higher price regardless of comfort's decision.

Reason- Irrespective of what Comfort chooses, Timmy always chooses high price as it gives higher payoff.So Timmy's threat is not credible.

2. a. enters, it will receive profit of $12.5 million rather than zero.

reason- When Comfort doesn't enter it receive profit of $0.

When Comfort enters it receive profit of $12.5 million. So it's more profitable to enter.

Note-According to HOMEWORKLIB RULES first question can be answered

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1. 2. Timely strategies Cred squares High price Low price 17.5 2.5 Comfort Enter 12.5 0...

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