Company sells identical radial tires through two channels

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Reference no: EM131201999

American Tire and Rubber Company sells identical radial tires through two channels

1) sell under the firm’s own brand name;

2) sell to discount stores for private labeling.

Marginal Cost is a constant $10 per tire, regardless of the sub-market in which the tire is sold. The firm has estimated the following demand curves for each market:

P1 = 70 - 0.5 q1 (brand name)

P2 = 20 - 0.2 q2 (private brand)

The firm’s total cost function is given as: TC = 10Q and Q = q1 + q2

If the company can practice third-degree price discrimation, calculate the following in each market:

(a) profit-maximizing price & quantity in

Reference no: EM131201999

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