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Suppose the CEO comes up to us one day. (He's friendly enough, but given some of his ideas, you're starting to dread these conversations.) "Hey. I have an idea," the CEO begins. You brace yourself and smile. "Oh yeah?" He nods affirmatively and begins. "I say we increase the price of our dry cleaning fluid by five percent tomorrow." "Why is that? Things are looking pretty good for us right now." He shakes off your reassurance. "Yeah, but we can do better. You know Bobby's place, just down the road?" You start to feel a sense of dread. Bobby is a competitor of your company in the dry cleaning market. He also has a less-than-stellar reputation in the business community. "Of course. I know Bobby's Chemical Solutions. They produce dry cleaner fluid just like we do." "Yep. And he and I have been talking. We're the only companies in the tri-state area who supply enough dry cleaning fluid to local companies. Transportation costs of all our other competitors are too high for them to supply the dry cleaners." You're impressed. Your boss has been doing some research on the industry. He continues. "So Bobby and I had dinner last night after the Chamber of Commerce meeting. We'll both increase our prices by five percent starting tomorrow, and we'll be able to make a fortune." "What happens if the government investigates why we increased our prices at the same time that Bobby did?" you state. "Collusion is illegal, and the government is rather serious about it." The CEO smiles. "It's ok. We didn't put anything down in writing. If the government investigates, we'll just say we're changing our prices due to evolving market conditions. If Bobby would have to respond to a new economic environment, then so would we! This is foolproof!" What would we tell to our CEO to convince him not to pursue this course of action? Try to play to his economic side instead of his legal sensibilities.
If prices increase for an export good and provide an incentive to increase production in an economy with specialized resources, will the higher price always outweigh the increasing opportunity cost of pulling specialized factors away from producing o..
You sell bicycle theft insurance. If bicycle owners do not know whether they are high- or low-risk consumers, is there an adverse selection problem?
How to perform a RFM analysis with the above quintile-based sorting algorithm. (5>4>3>2>1)
What additional programs did the Fed create and implement to facilitate its role as leader of last resort? What was the primary purpose of these new programs?
Using the Library, the Internet, and your course materials, briefly define and explain dynamic pricing. Select a company that uses (or has used) dynamic pricing and respond to the following questions
What is the best practices frontier? How does this relate to competitive advantage? Explain why rent seeking competition tends to dissipate rents-to drive them down so that there are no abnormal rents?
Suppose an individual consumers two goods, with utility function U (x1, x2) = x1 + 6sqrt(x1x2) + 9x2. Formulate the consumers utility maximization problem when she faces a budget line p1x1 + p2x2 = I. Find the demand functions for goods 1 and 2.
A country’s national saving is 20% of its national income and it needs $4 worth of capital for producing $1 worth of goods and services on the average. The economic planners want the country to grow at the rate of 10% per annum and expect that there ..
Explain what was the purpose of Bretton Wood conference. What flaw in the system ultimately led it to break down in 1971? Dow do we manage exchange rates at the presently time in industrial countries?
The relevant cost index was 120 4 years ago. The cost then for a gas station tank of 1,500 gallons was $40,000. We want to now purchase one size 4,500 gallons but the purchased price cost index is now 300. Assuming a power law size model with exponen..
The inflation-free rate (real rate) is 2.3% per year and the inflation rate is 2.03% per year. The effective interest rate (market rate) is therefore
Textbooks for college courses in economics tend to be very expensive even though the material in the books is not particularly unique. In fact almost all textbooks contain the same theories and concepts and differ only in applications, examples, and ..
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