Question
a. An author receives a royalty based on 1/2 of the revenue generated by the sale of her book.1 Assume that the book's inverse demand
a. An author receives a royalty based on 1/2 of the revenue generated by the sale of her book.1 Assume that the book's inverse demand is given by: P = 100 - Q. It costs the publisher $10 to produce an additional copy of the book. Given the royalty plan, discuss the conflict that this arrangement creates between the author and the publisher about the amount to produce. Ignore issues related with the promotion. Focus on pricing decisions. Include explanation that summarizes the effects of the royalty on market outcomes. Please illustrate. The numbers associated with profit maximization are not important here.
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