How much profit would golden inn and village diner earn

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Reference no: EM13221940

-When he retired as CEO of American Airlines, a position he held for 18 years, Robert Crandall was described in a Newsweek article as "one tough (expletive". Other nicknames Crandall garnered during his career included Fang, Bob, the Butcher and Wretched Robert. Newsweek noted that Crandall's "salty language and brass knuckle, in-your-face" style of dealing with employees and rival airlines is now out style in the executive suites of U.S. corporations. In strategic decision-making situations, why might Crandall's style of management have been advantageous to American Airlines?

- In 1999 Mercedes-Benz USA adopted a new pricing policy, which it called NFP (negotiation-free process), that sought to eliminate price negotiations between customers and new-car dealers. An article in The New York Times (August 29, 1999) reported that a New Jersey Mercedes dealer who had his franchise revoked is suing Mercedes, claiming that he was fired for refusing to go along with Mercedes' no-haggling pricing policy. The New Jersey dealer said he thought the NFP policy was illegal Why might Mercedes' NFP policy be illegal? Can you offer another reason why the New Jersey dealer might not have wished to follow a no-haggling policy?

- The two largest diner chains in Kansas compete for weekday breakfast customers. The two chains, Golden Inn and Village Diner, each offer weekday breakfast customers a "breakfast club" membership that entitles customers to a breakfast buffet between 6: 00 A.M. and 8:30 A.M. Club Memberships are sold as " passes" good for 20 weekday breakfast visits.

Golden Inn offers a modest but tasty buffet, while Village Diner provides a wider variety of breakfast items that are also said to be quite tasty. The demand function for breakfast club memberships are

QG = 5,000 - 25PG + 10PV

Qv = 4,200 - 24Pv + 15G

Where QG and Qv are the number of club membership sold monthly and PG and PV are the prices of club memberships, both respectively, at Golden Inn and Village Diner chains. Both diners experience long-run constant costs of production, which are

PG = BRG (PV) = 125 + 0.2PV

PV = BRV (PG) + 125 + 0.3125PG

a. If Village Diner charges $200 for its breakfast club membership, find the demand inverse demand, and marginal revenue functions for Golden Inn. What is the profit maximizing price for Golden Inn given Village Diner charges a price of $200? Verify mathematically that this price can be obtained from the appropriate best-response curve given above.

b. Find the Nash equilibrium prices for the two diners. How many breakfast club memberships will each diner sell in Nash equilibrium? How much profit will each diner make?

c. How much profit would Golden Inn and Village Diner earn if they charged prices of $165 and $180?

Reference no: EM13221940

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