Discussion about industry
1- Pick out any industry you are familiar with ( or local market). Based on the
theories presented in Chapter 7, discuss how the firms in this industry/market
compete. I need Just one page or less
Short answers for the five questions.
4. Explain why prices are usually strategic complements and capacities are usually strategic
substitutes.
6. Consider a monopoly producer of a durable good, such as a supercomputer. The good does
not depreciate. Once consumers purchase the good from the monopolist, they are free to sell
it in the “secondhand” market. Often in markets for new durable goods, one sees the following
pricing pattern: The seller starts off charging a high price but then lowers the price over time.
Explain why, with a durable good, the monopolist might prefer to commit to keep its selling
price constant over time. Can you think of a way that the monopolist might be able to make a
credible commitment to do this?
7. Indicate whether the strategic effects of the following competitive moves are likely to be
positive (beneficial to the firm making them) or negative (harmful to the firm making them).
(a) Two horizontally differentiated producers of diesel railroad engines— one located in the
United States and the other in Europe—compete in the European market as Bertrand price
competitors. The U.S. manufacturer lobbies the U.S. government to give it an export subsidy,
the amount of which is directly proportional to the amount of output the firm sells in the
European market.
(b) A Cornet duopolistic issues new debt to repurchase shares of its stock. The new debt issue
will preclude the firm raising additional debt in the foresee- able future, and is expected to
constrain the firm from modernizing existing production facilities.
8. Which of the following are examples of real options?
(a) Abasketballteamownerdelayssigningastarfreeagenttoaone-yearcontract, preferring to wait
and see if his team is in contention for a championship.
(b) A hockey team owner delays building a new stadium because interest rates are
high and may soon come down.
(c) A student delays studying for a final exam because she expects to soon receive
a job offer that would make her grade point average moot.
(d) Blockbuster Video delays entering the DVD rental market (see Chapter 6 for
more details on the DVD rental market).
12. Firms operating at or near capacity are unlikely to instigate price wars. Briefly explain.
Answer preview:
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