Reference no: EM132210821

1) Competitive Product Positioning License Expired

You sell miniature electric motors in a specialized market with space for only two players, you and competitor MM. Technological constraints impose a strict trade-off between the motor's speed and its precision. Industry standards characterize the trade-off by a number between 0 and 100, with 0 being the highest speed and lowest precision and 100 being at the opposite end of the spectrum. A motor's speed-precision characteristic is thus completely specified by its 'position' on a line from 0 to 100. Customers differ in the trade-off they prefer, with preferences essentially uniformly distributed between 0 and 100. In other words, it is as if there is one customer who prefers 0, one who prefers 1, etc ..., and one who prefers 100. Customers also care about price and are willing to accept a deviation from their ideal speed/precision trade-off in exchange for a lower price. (Note: for this setting, the starting value is not necessarily optimal.)

Scenario 1: Positioning with fixed price
Consider first a scenario where, for exogenous reasons, your and your competitor's prices are (irreversibly) fixed and identical at p=10. Your competitor has already (irreversibly) positioned its motor at a speed-precision of 90. Now it is your turn to choose a position for your motor. When choosing its position, please restrict yourself to integer numbers between 0 and 100.

Scenario 2: Positioning and price
Consider next a scenario where both position and price still need to be chosen. Your competitor has again (irreversibly) positioned its motor at a speed/precision trade-off of 90 and is now waiting for your position and price choices to choose the price for its own motor. You now have to choose both your motor's position and its price. The market is sufficiently transparent that your competitor can immediately observe both. Your competitor then chooses its motor's price in response. Your competitor will always choose its price to maximize its profits.

2) Competitive Capacity Choices
You are one of two competitors in a market for computer memory. Computer memory is essentially a commodity product, so there is almost no differentiation and price is determined by supply and demand. Manufacturing facilities (Tabs) are very capital intensive and therefore run at capacity. Capacity decisions are made long in advance of actual production and are difficult to change. Since you can't influence the price directly, your only choice is your level of capacity (which influences price indirectly). You and your competitor have identical cost structures: a cost of 10 per unit of capacity plus an overall fixed cost of 100.

Your competitor, CMC, has already (irreversibly) committed to its level of capacity. Now it is your turn to choose capacity. (Your competitor's capacity choices are not necessarily optimaL The focus here is on how your optimal response depends on your competitor's choice.) Please find your optimal capacity under the following 3 scenarios, which all have the exact same market structure but differ in the capacity chosen by your competitor. (You should try out different capacities to find the best one. To speed the process, it suffices to consider multiples of 5.)

3) Price Competition License Expired
You are a manufacturer of "white box" modems, i.e., modems without a brand name, and have only one competitor in your market, MC. Despite the advanced nature of the product, "white box" modems are all very similar, so there is essentially no differentiation. Since you and your competitor both outsource production to the same firm, you have identical cost structures: no fixed cost and a per unit variable cost of $40. Moreover, outsourcing allows you to produce 'on demand', thus perfectly matching capacity to the demand that materializes. So you have only one choice left: what price you set for your modems.

Your competitor has already (irreversibly) announced its price. Now it is your turn to choose your price. (Your competitor's price choices are not necessarily optimal. The focus here is on how your optimal response depends on your competitor's choice.) Please find the best price for your modem under the following 3 scenarios, which all have the same market structure but differ in the price set by your competitor. (You should try out different prices to find the best one. To speed the process, it suffices to consider multiples of 5 for prices.)

4) Number of Competitors License Expired
You are a manufacturer of "white box" modems, i.e., modems without a brand name, and have one or more competitors in your market. Despite the advanced nature of the product, "white box" modems are all very similar, so there is essentially no differentiation. Since you and your competitors all outsource production to the same firm, you all have the same cost structure: no fixed cost and a per unit variable cost of $40. Moreover, outsourcing allows you to produce 'on demand', thus perfectly matching capacity to the demand that materializes. All firms in the market thus have only one choice: the price of their modems

Your competitors have already (irreversibly) announced their price to be $70 (which is not necessarily optimal). Now it is your turn to choose your price.

Please find your optimal price under the following 2 scenarios, which have the same market structure and identical market size (100) but differ in the number of competitors in the market. (You should try out different prices to find the best one. To speed the process, it sufficed to consider integer numbers for prices.)

5) Capacity and Prices License Expired
You are a manufacturer of large disk drives with only one competitor in your market, DD. (Large disk drives are all very similar, so there is relatively little differentiation.) You and your competitor both produce your own drives. How many drives you can produce will be limited by the production capacity you have installed. While you can produce less than your capacity, you can never produce more than your capacity. You will have to choose your capacity long before you make actual price and production decisions. The market is sufficiently transparent that you know DD's capacity and they know yours. To simplify the discussion, let production capacity be completely free. So the only effect of choosing capacity is that you limit how much you can produce in the future. Actual production is very flexible, so you can adjust your production levels to the demand that materializes (up to your production capacity). The cost of production is $10 per drive for both you and DD. There is no fixed cost.

Your competitor DD has already (irreversibly) chosen its production capacity: it will be able to produce at most 100,000 drives which allows it to serve the whole market, if needed. You now have to choose your production capacity. In terms of price setting, the scenario is that you first set your price and then DD responds. (Based on both your prices, actual orders get generated. Both you and DD then produce these orders up to your production capacity. Any demand that you can't fulfill will buy from DD and the other way around.)
Please find your best capacity level and price. (You can try out different capacity levels and prices to find the best one. To speed the process, consider only multiples of 5 for capacity. Hint: Try both 40 and 100 as capacity and observe how it affects DD's price setting behavior.)

6) Market Size and Profitability License Expired
You are considering launching a broadband internet service in a local market. Currently there is one incumbent, BB, providing broadband internet service in this market. Your technology is similar to that of BB: both the service characteristics and the cost structure are identical. In particular, both firms incur a fixed cost of 2500 for running the network and a variable cost of 40 per customer.

You have to decide whether to enter and, if so, what price to set for your service. BB will then set its own price in response to yours. Please find your optimal decisions under the following 3 scenarios, which all have the exact same structure and differ only in the size of the market. (Try out different prices to find the best one. To speed the process, it suffices to consider multiples of 5.)

7) Technology choice and entry License Expired
You are considering launching a cable network in a local market. Currently there is one incumbent, CN. Your technology has the same service characteristics as CN. You incur a fixed cost of $1000 for running the network and a variable cost of $20 per customer. CN, on the other hand, has a choice of technologies, with identical service characteristics but different cost structures.

You have to decide whether to enter and, if so, what price to set for your service. CN will then set its own price in response to yours. Please find your optimal decisions under the following 3 scenarios, which all have the same structure but differ (only) in the cost structure of CN.

8) Technology Choice License Expired
As a producer of medical equipment, you have to choose your production technology. There are 2 possible technologies. The first technology has no fixed cost but $100 variable cost per unit. The second technology has $10,000 fixed cost but only $20 variable cost per unit. The default technology is the one with low fixed cost, but you can switch if you want. Each unit will be sold at $120. Please make a decision whether to switch to the technology with high fixed cost under the following 2 scenario's: you either need to produce 10 units or 1000 units.

Attachment:- Competition Simulator Exercise.rar