How are profits affected for both companies as a consequence of the sequence of decisions made by these two families. the Riojas and the Riberas?
The Spanish Wine Market in New York The market for wine in New York City both them: to have accurate is controlled by two families, the information about the situation of the Riberas and the Riojas. Both families demand for Spanish wine in New York. manage businesses that have After the opening of Michelin starred accumulated decades of experience and Jose Andres's Mercado Little Spain are widely consolidated in the New (https://www.littlespain.com/), the York market. They control the trade of demand has registered a sharp increase Spanish wine there, imported from two and they needed exact data about it. of the best producing areas in Spain. That is why they decided to hire the The Riberas and Riojas know that the marketing agency in town. They have development of their businesses just received the information from depends on how the other evolves. Bandon Cooper, Market Research They are very aware that in their Director at BMA. The table below decision-making process they must shows the daily number of boxes of 12 always bear in mind the actions of their bottles of Spanish wine (2nd column) competitor. They are both very satisfied that restaurants would be willing to buy with how the demand for Spanish wine considering the price shown in the first in New York has grown. Much of this column (USD).development of their businesses depends on how the other evolves. They are very aware that in their decisionmaking process they must always bear in mind the actions of their competitor. They are both very satised with how the demand for Spanish wine in New York has grown. Much of this success is attributed to the quality of the tempranillo and garnacha Spanish graves, the professional skills of the winemakers in their country and the experience that both families have accumulated in the NYC market. Their wine is unique and that is why there is no room for competitors in this market. Juan Ribera and Jorge Rioja met in December last year to cooperate in a very important issue that is important for IE University. Microeconomics. Oligopoly. NDANS just received the information from Bandon Cooper, Market Research Director at BMA. The table below shows the daily number of boxes of 12 bottles of Spanish wine (2jml column) that restaurants would be willing to buy considering the price shown in the rst column (U SD). 5100 1,000 90 1,500 an 2,000 70 2,500 60 3,000 50 3,500 40 0,000 30 0,500 20 5,000 10 5,500 Pedro Ribera, Juan's brother, has always been interested in charging the highest possible price per box of wine. He knows that the best way to do this is to make a pact with his competitor. He has managed to convince his brother, rst, and Jorge Rioja, later, to reach the following agreement: throughout the year 2020, both companies will seek to without competing against each other and sharing the market 5050 (each company produces half of the total output). Their cost structure is similar. Their daily xed cost is USD 2.000 and the cost of selling each box of wine is a maximize their prots constant USD 40. Consequently, profits are substantial. Prot maximization has always been their raison d'etre. With this in mind, and after some months since both companies reached the agreement, Jorge thought of slightly increasing his agreement and increasing sales. After all, profits are everything in business. Profit maximization has always been their raison d'etre. With this in mind, and after some months since both companies reached the agreement, Jorge thought of slightly increasing his production in order to obtain a greater benefit. And that's exactly what the Riojas did, they raised sales by 500 boxes. At first, they were satisfied with the effect in their revenues and profit. But this decision had also a consequence in the Ribera's profit, who obviously reacted consequently. And that is something that Jorge hadn't thought of. Jorge and his family were currently analysing the situation at a shareholders' meeting to assess whether they had made a mistake in breaking the IE University. Microeconomics. Oligopoly. NDANS
