Reference no: EM1315372

Allan Sports sells snowmobiles in a Northern Suburb of the Twin Cities. For the third year in a row sales have been dismal. Two years ago, Allan Sports had 20 snowmobiles left over at the end of the selling season and was able to sell only by discounting them $500. Last year, Allan Sports had 16 sleds left and "dumped" them on the market for $800 below the regular season price. This year a dealer in Yellowstone Park has offered to buy the 30 remaining snowmobiles for $1,000 below retail. Allan Sports just contacted the manufacturer and discussed plans for next year. "I'm getting killed on this and I want to reduce my order to only 100 snowmobiles for next year. I will then be able to sell the 100 at $5,000. With only 100 to sell at that price, I know I will be able to supply the market so no one will go without a snowmobile. No shortages and no surpluses," said the owner. The manufacturer sent back a memo stating that the Exclusive Dealer Contract they have requires Allan to sell 130 per year at $5,500. No discounts. If the Allan cannot meet the contract, then they will no longer be the area dealer. "That would pretty much put us out of business," said Roger Allan, the owner.
Is $5,500 above, below or at the equilibrium price for Allan's snowmobiles?