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How much value do you expect each player to capture

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Q1. There are three firms, labeled A, B, and C, each able to produce a single unit of a product. There are numerous suppliers, each of which can supply the necessary input to only one firm; each supplier has a supplier cost (or opportunity cost) of $4. There are two buyers, each interested in buying at most one unit. Both buyers have a willingness-to-pay of $9 for each firm's product.

a) What is the total value of this game? What is the added value of each player?

b) How much value do you expect each player to capture?

Q2. Now suppose a slight change to the game. Everything is the same for firms B and C as before. But now, suppliers have a supplier cost of $5 for supplying firm A, and buyers have a willingness-to-pay of $11 for firm A's product. Recalculate the added values of the players, and find how much value each player will capture, in the second game.

3. There are three firms, labeled A, B, and C, each able to produce a single unit of a product. There are numerous suppliers, each of which can supply at most one firm. Each supplier has a supplier cost of $2 of supplying firm A, a supplier cost of $3 of supplying firm B, and a supplier cost of $5 of supplying firm C. There are two buyers, each interested in buying at most one unit. Each buyer has a willingness-to-pay of $10 for firm A's product, a willingness-to-pay of $12 for firm B's product, and a willingness-to-pay of $13 for firm C's product. Thus, firm A is the cost leader in this market, and firm C is the differentiator or high-quality provider.

a) What is the total value of this game?

b) What is the added value of each player?

c) How much value do you expect each player to capture?

Reference no: EM133086085

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