9781118041581

Other Dimensions of Competition 377 a rival’s increase in output induces a lower quantity of output by the firm itself. In this ...

spending, and lowering unit costs would all qualify as tough commitments. Indeed, Fudenberg and Tirole characterize any of these ...

Other Dimensions of Competition 379 Profit is simply revenue minus production cost minus total advertising cost. We see that det ...

“Coke is the real thing,” “Only Rolaids spells relief,” and “Tropicana Orange Juice tastes like fresh squeezed, not concentrate. ...

Other Dimensions of Competition 381 competition—where products are standardized and consumers already have perfect information—w ...

The crucial entry barrier stemmed from the major companies’ direct give-away pro- grams to hospitals and doctors. With 90 percen ...

Summary 383 SUMMARY Decision-Making Principles The key to making optimal decisions in an oligopoly is anticipating the actions ...

The prisoner’s dilemma embraces such diverse cases as price wars, cartel cheating, arms races, and resource depletion. In each ...

Summary 385 where QWdenotes the quantity of oil (in millions of barrels per day) and P is price per barrel. OPEC’s economists al ...

a. Fill in the profit entries in the payoff table. b. If the firms act independently, what advertising level should each choose? ...

Summary 387 b. Explain why a lower price by its competitor should cause the firm to lower its own price. c. In equilibrium, the ...

c. Using the results in part (b), write the firm’s profit expression in terms of A alone. Find the firm’s optimal level of adver ...

Summary 389 S2. A firm faces a price equation P 12.5  .5A.5 .25Q and a cost equation C 5Q A, where Q denotes its output and ...

Suggested References The following texts provide comprehensive treatments of market structure and oligopoly. Besanko, D., D. Dra ...

Summary 391 In the off-diagonal entries in Table 9.2, both the low-price firm and the high-price firm earn $8 million in profit ...

Besides pricing its separate products, oligopolistic firms frequently choose to bundletheir products, that is, to sell two or mo ...

Appendix to Chapter 9 Bundling and Tying 393 the $7,000 price is the better option. Similarly, one can check that the studio’s o ...

394 Appendix to Chapter 9 Bundling and Tying uncorrelated values. In particular, suppose that each of the 1,000 theaters that ma ...

Appendix to Chapter 9 Bundling and Tying 395 studio’s total profit is (18,000 10,000)(1,000) (15,000 5,000)(500)  $13,000,00 ...

396 Appendix to Chapter 9 Bundling and Tying pay a higher (total) price than average users. Thus, the firm can effectively seg- ...