You are the manager of a retail electronics store. Recently, you purchased 200 What-A-Sound portable CD players from a wholesaler in a going-out-of-business sale. These units cost you $80 each, about half of the normal cost of other brands that you sell for $260. You expected to sell these units at the regular price and earn an above-normal profit. After your purchase, you discovered that the units were poorly constructed and would probably last about a third as long as other major brands. Customers often ask you for a recommendation when considering the purchase of a portable CD player. If you tell them the truth about the What-A-Sound model, you may have difficulty selling these units, even if you offer a steep discount.

Required
What are the short-run and long-run implications for your company’s profits if (a) you conceal the quality of the units and sell them at their regular price or (b) reveal the quality problem? If you were to choose alternative b, what options might you consider in an effort to minimize the effect of these units on your profits?