Ch11Q9

Blue Skies Aviation is a manufacturer of small single-engine airplanes. The company is relatively smail and prides itseif on being the outside vendors, and it preserves its competive advantage by refusing to sell engines to competitors. To achleve maximum efficiencles, the company has organized itself into two divisions, a division that manufactures engines and a division that manufactures airplane bodies and assembles airplanes Consultants have estimated that: Demand for Blue Skles' customized planes is given by P=650,0002,0000. The cost of procucing engines is Cd(Qe)=5,0000e2, and the cost of assembling airplanes is Cd(Q)=20,000Q What problems would occur if the managers of each divifon were given incentives fo maximize each divion's profit separately? Lower profits due to double marginalization Lower profis due to randomized pricing Lower profits due to price ciscimisation Lower pronts due to block pricing What problems would occur if the managers of each division were given incentives to maximize each division's profit separately? Lower profits due to double marginalization Lower profits due to randomized pricing Lower profis due to price discrimination. Lower profits due to block pricing What price should the owners of Blue skies set for engines in order to avoid this problem and maximize overall profis