Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the pizza stores introduced in Exercise UZ, Donna's Deep Dish and Pierce's Pizza Pies Suppose that they are not constrained to choose from only

image text in transcribed

image text in transcribed
Consider the pizza stores introduced in Exercise UZ, Donna's Deep Dish and Pierce's Pizza Pies Suppose that they are not constrained to choose from only two possible prices, but that they can choose a specic value for price to maximize prots. Suppose further that it costs $3 to make each pizza (for each store) and that experience or market surveys have shown that the relation between sales (0) and price (P) for each rm is as follows: Ql'icnr = '2 ... \"Pietra-2 + 0'5P1'Jnnna' Then prots per week i Y, in thousands of dollars) for each rm are: View = ism mm = (Pm - 3102 mm + 0.59m. YDrmna _ (PDrmmr ' 3)Ql')unna _ (Puma: - 3)(12 P0131\": + 0-5Pmm)- A) What prices do the firms choose in equilibrium? Round your answer to the nearest penny. B) How much profit per week does each firm earn? Round your answer to the nearest integer. C) What price do they choose to maximize joint profits? Round your answer to the nearest penny. D) What profit does each store earn when they price to maximize joint profits? Round your answer to the nearest integer. E) If one of them holds the price at the agreed level, what is the best defecting price for the other? Round your answer to the nearest penny. F) If one of them holds the price at the agreed level, and the other uses its best defecting price (which you found above), how much profit does the defecting firm earn? Round your answer to the nearest integer. G) What is the threshold value of the interest rate, below which collusion can be sustained using trigger strategies

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Jan Williams, Susan Haka

17th Edition

126000645X, 9781260006452

More Books

Students also viewed these Economics questions

Question

A greater tendency to create winwin situations.

Answered: 1 week ago

Question

Improving creative problem-solving ability.

Answered: 1 week ago