What would be nash equilibrium-equilibrium wholesale price

Assignment Help Business Economics

Reference no: EM131163595

Suppose that a car dealer has a local monopoly in Selling Volvos. It pays the wholesale price w to Volvo for each car that it sells, and charges each consumer the retail price p. The demand curve for the dealer in the retail market is p=60-q, where price is in units of thousands of dollars. The marginal cost of Volvo is 20.

A. Suppose that the car dealer and Volvo work separately. What would be the Nash equilibrium?

B. Find the equilibrium wholesale price and retail price: w and p. Find the equilibrium profits for the dealer and Volvo.

C. Now suppose that Volvo bought the ownership of the car dealer. For the integrated firm, what will be the optimal retail price p? Find the equilibrium total profit for the integrated firm.

D. In terms of total profit, is the separation scenario in (A) better than the integration scenario (C)? How about consumer surplus?

E. Now suppose that integration is not feasible. Design a franchise contract to achieve the same production, retail price and total profit as achieved in part (C) and (D). Moreover, please specify the shares of Volvo and the dealer, so that Volvo’s profit is twice that of the dealer, πM=2πR.

Reference no: EM131163595

Questions Cloud

Solve for nash equilibrium and find equilibrium wholesale : ABC Inc is a monopolist selling to two competitive retailers who engage in the Bertrand competition. ABC Inc has a constant marginal cost of 10. Demand at the retail market is given by p=70-q. Solve for the Nash equilibrium, and find the equilibrium ..

Find the probabiity that both adults : a. Find the probabiity that both adults dine out more than once per week. Round to 3 places b. Find the probability that neither adult dines out more than once per week. Round to 3 places c. Find the probability that at least one of the two adults ..

Are poor countries somehow different than wealthy countries : Are poor countries somehow "different" than wealthy countries? How can firms and markets increase the wealth of poor countries? Be sure to address each question in the problem.

What is the rate of draining when the gutter is full : The gutter is designed for a sudden rainstorm of up to 5 mm per hour. For this condition, what is the maximum roof area that can be drained successfully?

What would be nash equilibrium-equilibrium wholesale price : Suppose that a car dealer has a local monopoly in Selling Volvos. It pays the wholesale price w to Volvo for each car that it sells, and charges each consumer the retail price p. Suppose that the car dealer and Volvo work separately. What would be th..

Prepare information for a business audience : prepare a short commentary for a business audience explaining the concepts of value and exchange in such a way that business owners...

Given the facts above should you lease the house or sell it : Given the facts above, should you lease the house or sell it? The current market value is approximately $320,000. Explain your rationale, and show your work.

Describe how you will attempt to implement actions : Of the valuable intellectual traits listed in the online readings from this week, identify three of them that you can further strengthen. Explain the traits, and then describe how you will attempt to implement actions in your life that will maximi..

Discuss different strategies to reduce intergroup conflict : Discuss the different strategies to reduce intergroup conflict found in your text and the Hewstone article

User Account

All Pages