Question
Once upon a time, there was one and only Gucci beer seller supplying beer exclusively for the entire market in Boo's land. After hearing beer
Once upon a time, there was one and only Gucci beer seller supplying beer exclusively for the entire market in Boo's land. After hearing beer drinkers' complaints, Judge Bacchus ordered the Gucci Beer Company to be split into three companies, including Gucci, Bud and Hein brands. Each would have their own unique taste.
1Describe the marketbeforethe split andafterthe split in the beer industry.(2.5 point)
Suppose that after the split the three beer makers compete and usenon collusivebehavior. If all three companies share equally in the industry, describe their possible price policies facing the public (with Kinked demand).(2.5point)
Suppose that the three beer makers engage incollusivebehavior after the split and that Gucci Beer is the biggest of the three companies. Describe the possible price policies that could result(with cartel or price leadership). (2.5 point)
Suppose that beer bootleggers develop their own beers using micro-brewing techniques. What impact would this have on the beer market?What possible price policies and profits would be observed in the long run? (2.5point)
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