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Question;1.;Concert price have increased;coincidentally with illegal downloading of music off the internet. Using your;knowledge of multiproduct pricing, explain the causal link between these two;events.;2.;You run a movie theater in a small town with;only ten people. These ten individuals have willingness-to-pay values of {$1;$2, $3, $4, $5, $6, $7, $8, $9, $10}. Your only cost is a $2.50 fee that you;must pay to the film distributor for every ticket you sell. Your marginal cost;is, therefore, $2.50.;a. What is the profit-maximizing uniform price (i.e. no;price discrimination)? How much profit do you earn at this price level?;b. Suppose that you learn that all of those with low values;of {$1, $2, $3, $4, $5} are senior citizens, thereby allowing you to employ a;direct price discrimination strategy based on consumer age. What prices should;you charge to seniors and non-seniors? How much profit do you earn using this;pricing strategy?;3. Some internet retailers track;whether its customers have recently visited popular price-comparison websites.;Why might these retailers offer different prices to those who have and have not;recently visited price-comparison sites? If different prices are offered, which;group will be offered the lower price? How well would this strategy work if;customers knew about the internet retailers? plan?;4. Suppose that you work for a;national cell phone company. After conducting a survey of potential users, you;have determined that your cell phone customers can be classified as either ?casual?;or ?heavy? users. The numbers of casual and heavy users are equal. Your survey;reveals that that casual and heavy cell phone users place the following values;on your two different calling plans;Calling Plan: Casual user Heavy user;500 Anytime Minutes $45 $65;Unlimited Minutes $60 $100;Assuming that the marginal cost of;providing cell phone service is zero, calculate optimal prices and profits;under each of the following pricing strategies;a.;Sell only to heavy cell phone users;b. Sell to all users at a single low;price;c. Sell to both groups using price;discrimination (this is indirect price discrimination);d. Which of these three strategies;yields the most profit for the cell phone provider?;5. An amusement park is considering;changing its pricing system from a pay-per-ride system to a single entrance fee;entitling the entrant to unlimited rides. Assume that the park is not close to;approaching the attendance capacity. The marginal value for rides for the;typical entrant is listed below;Quantity (# of rides) Marginal;value ($);1 $2.50;2 $2.00;3 $1.50;4 $1.00;5 $0.50;6 $0.10;7 $0;a. Assuming that the marginal cost;is zero to provide the rides to those in attendance, what is the best;pay-per-ride price (take make things convenient for the cashiers, consider only;50 cent increments)?;b. Instead of pay-per-ride, you;implement an entrance fee (and unlimited rides). What is the profit-maximizing;entrance fee?;c. Under which system are profits;higher?;6. There are two niches in the;market for electronic sensors, one is SIZE (where smaller sensors are;preferred) and the other is PERFORMANCE (where high performance sensors are;preferred). Two firms, A and B, must simultaneously choose which niche to;target their product to. The payoff;matrix is shown below, where profits are listed in millions of dollars.;Company B;PERFORMANCE;SIZE;Company A;PERFORMANCE;A makes $3;B makes $2;A makes $10;B makes $3;SIZE;A makes $4;B makes $4;A makes $11;B makes $2;a.;Find all of the Nash equilibria, if;any. Be sure to somehow demonstrate to me;How you arrived at your answer;(underline best responses in the table, explain the;best responses verbally, etc.);b.;Now suppose Firm A has the;opportunity to move first, choosing its niche before Firm B. Use a tree diagram;to show which niche company A will choose.;c.;How much would Firm A be willing to;pay to B so that A could move first. The;alternative is to keep playing the;current game.;7. Your company produces and sells;Product A, which has a price elasticity of demand of -1.8. You acquire a;substitute product B, which has an associated price elasticity of demand of;-0.8. How should you handle pricing? Be sure to thoroughly explain your answer.;8. Comcast and Verizon are;considering which services to offer customers in the Nashville region. Each;firm could offer phone service (alone), cable service (alone), or offer both;services. We can model these decisions in a payoff matrix (as shown below).;What is the Nash equilibrium of the game? Explain your answer. The payoffs in;the table can be read: (Comcast?s Profit, Verizon?s Profit).;COMCAST;Offer phone;service only;Offer only cable;service;Offer both;VERIZON;Offer phone;service only;($100, $200);($300, $300);($200, $300);Offer only cable;service;($300, $300);($200, $200);($400, $100);Offer both;($100, $400);($300, $400);($200, $200)


Paper#56676 | Written in 18-Jul-2015

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