Answer Question with full and clear explanation, and with all calculating process. (step by step)

Since Rupert Murdoch took over the archrival New Yan Part, a series of price cuts and retaliatory moves have taken place. These events have severely affected industry prots. Leonard N. Stern, formerly owner of The Viiiage Voice, summarized the situation as follows: The Daffy News is the dominant tabloid of the city, and it is now under challenge for its life. This is it. I believe the battle has been joined. When it's over, things are not going to look the way they do today. And referring to Rupert Murdoch's willingness to take losses, he added: I've been in many businesses, including publishing. I can tell you categorically: I don't want to be in any business where I have to compete with Rupert Murdoch. You have been hired by the Dairy}! New: as a strategy consultant. During your rst meeting with the management of the Dizzy}; News, the situation was summarized as follows: Everything was ne until Murdoch took over the Post. Currently, we are both pricing at 25, down from our normal 50. True, circulation and advertising revenues have gone up, but the problem is that our net prot is down by a lot. You can look at it from two points of view. One is: with low prices we are leaving a lot of money on the table. The other one is: we are playing the game against a fellow named Murdoch. At the meeting, you were provided with circulation and revenue data for both papers, which is available in the dai lynews . xlsx spreadsheet. You'll see there that newspapers have two important sources of revenue: sales and advertising. Advertising is tied to circulation, so a lower price that generates higher circulation may raise advertising revenue. At the meeting with the Drug! Now, you were also told that overhead costs are in the order of $525,000 per week for both firms. Marginal costs are estimated to be 1293 per copy for the Past and 1393 per copy for the New. Also, for both papers, depreciation of equipment (printing presses, trucks, computers, etc.) averages at about Sgt a copy (although it is higher when circulation is lower and vice versa). All of this information is common knowledge throughout the industry. The senior management of the Baggy New: wants a short report that addresses the following questions with respect to the pricing of newspapers: (a) Suppose that each rm's newspaper price is set only once and must be either 25 or 5093. What price do you expect the Part to charge? And what price should the D335! New: charge? Explain. (b) Suppose that prices are set only once but each newspaper has complete flexibility as to what price to charge (rounded off to the nearest penny). What price do you expect the PM; to charge? And what price should the DMZ}! N 21w charge? Explain. NYC tabloid market: price, circulation and advertising revenue Price (cents) Circulation (000) Advertising revenue ($000) Week D News NY Post D News NY Post D News NY Post 50 50 847 569 486 461 N - 50 50 843 585 507 445 50 50 815 529 534 447 50 50 842 575 507 479 50 50 791 574 471 416 50 50 795 547 486 442 50 50 776 516 487 405 50 50 788 532 497 440 50 50 780 520 478 401 10 50 50 804 555 506 441 11 50 50 804 559 513 457 50 25 548 912 340 642 50 25 582 979 426 680 14 25 25 1057 697 613 488 15 25 25 999 581 512 16 25 25 951 582 588 455 17 25 25 999 648 620 502 18 25 25 984 655 575 469 19 25 25 1009 618 567 502 20 25 25 1049 665 616 486 21 25 25 996 680 616 489 22 25 25 1057 617 631 510 23 25 25 1020 673 609 507 24 25 25 1008 662 653 510 25 25 25 1018 653 592 487 26 25 25 1026 652 590 521 27 25 50 1210 235 703 244 28 25 50 1227 274 684 268 29 25 50 1167 250 680 246 30 25 50 1178 240 698 249 31 25 50 1180 262 651 275 32 25 25 988 663 619 539 33 25 25 954 641 570 515 34 25 25 996 616 583 446 35 25 25 994 701 589 506 36 25 25 989 669 586 504 37 25 25 961 616 652 439 38 25 25 1052 687 681 493 39 25 25 980 590 601 462 40 25 25 942 657 548 476 41 25 25 961 685 564 516 42 25 25 985 63 595 503 43 25 25 960 659 581 502 44 25 25 963 652 548 532 45 25 25 967 660 590 487