TextBook: Economics of Strategy, 7th Edition

David Dranove,David Besanko,Mark Shanley,Scott Schaefer

ISBN:978-1-119-17477-6September 2015544Pages

ADAPTED Homework, Chapter 9-

(10 points possible, 2

points each)

1.Suppose two firms, Southwest Airlines and United Airlines, are competing in the

commercial airline market in which downstream buyer preferences are identical.

Suppose United Airlines charges some positive price for a major corporation to

sign an agreement for discounted fares for its employees and Southwest Airlines

doesn't.

a.Is airline travel a search good or an experience good? Explain.

b.Which firm is likely to provide the greatest value created? Explain.

2.Analysts sometimes suggest that firms should outsource low value-added activities. Under

what conditions do you agree? Explain.

5.

a.Why would the role of the marketing department in

capital-intensive industries (e.g., aluminum) differ from that in

labor-intensive industries (e.g., commercial airlines)?

b.How does this relate to positioning?

7. Identify one experience

good that you purchased recently.

Identify one search good you purchased

recently that was made in an industry

that is NOT capital intensive.

a.Explain how the retailing of that experience good differs from the retailing of that

search good.

b.How do these differences help consumers?

10. Consumers often

identify top brand names with quality. Think of a branded beverage you buy

regularly (perhaps Coca Cola or Pepsi).

a.Are youconvinced it's of higher quality than another beverage you could have purchased

(e.g., a similar beverage with a Stripes Convenience Store or Walmart brand

name), therefore justifying the higher price you pay?

b.If so,why doesn't Stripes or Walmart invest to establish a brand identity, thereby

enabling the company to raise prices of these beverages?