Determine the price and quantity of toasters, Operation Management

Assignment Help:

Determine the price and quantity of toasters:

There are 100 producers of toasters. Half of the producers are "low quality," i.e. their products will break with probability of 0.8, and their cost of production is $8 per toaster. The other half of the producers are "high quality," i.e., their products will break with probability of 0.1, and their cost of production is $40 per toaster. (A producer's type is fixed, so if you are low (high) quality then you only know how to manufacture low (high) quality toasters.) For simplicity, we assume that each producer only produces 1 toaster if it chooses to produce. For a buyer, a toaster that works has a value of $50, and a toaster that breaks has a value of 0. There is an infinite number of buyers. a. If a buyer knows for sure that a toaster is of low quality, what is its expected value to him?

b. If a buyer knows for sure that a toaster is of high quality, what is its expected value to him?

c. Suppose buyers cannot tell the difference between high and low quality toasters. Draw the supply and demand curves for toasters in a graph. Label everything clearly.
 
d. In equilibrium, what is the price and quantity of toasters? What kind(s) of toasters are bought and sold?

This is a follow-up to Problem. Suppose that all the producers sell toasters through Wal-Mart, and Wal-Mart lets producers choose from 2 options. With Option A, a producer sells a toaster at $49 but has to offer a free warranty to the consumer. With Option B, a producer sells a toaster at $10 without any warranty. A free warranty means that if a customer's toaster breaks, then she can return it and the producer must give her a full refund. (The returned good is of no use to anyone and will be dumped.)


a. Which option will a low-quality producer choose, A or B? Justify numerically.
 
b. Which option will a high-quality producer choose, A or B? Justify numerically.
 
c. Will offering a free warranty send a useful signal to the consumer in this case? Why?


Related Discussions:- Determine the price and quantity of toasters

Describe ways of improving decision making process, Question 1: (a) Exp...

Question 1: (a) Explain the specific steps you would take to ensure that an individual has the appropriate abilities to satisfactorily do a given job. (b) Explain  the four

Explain why is forecasting important in organizations, Why is forecasting i...

Why is forecasting important in organizations, especially as related to understanding the relevant time horizon to develop a forecast against? What are some examples from industry?

Explain when developing your communication strategy, Why should you conside...

Why should you consider the context of your message when developing your communication strategy? Identify four questions you should ask yourself to help you understand the context

What is the mixed strategies range, For the given matrix, what is the mixed...

For the given matrix, what is the mixed strategies range , Bob could make use  to dominate Middle ? Assume three Offices (A, B, and C) in downtown,  simultaneously decide whethe

Explain supply management, What is the difference between purchasing and su...

What is the difference between purchasing and supply management? What is the difference between a supply chain orientation and supply chain management?

Explain what is the economic production quantity, Race One Motors is an Ind...

Race One Motors is an Indonesian car manufacturer. At its largest manufacturing facility, in Jakarta, the company produces subcomponents at a rate of 300 per day, and it uses these

Centre of gravity method, Hi, I am looking to find any potential benefits o...

Hi, I am looking to find any potential benefits of the centre of gravity locational theory, in addition to this, would like to know of any potential drawbacks that the theory entai

Describe how you perceive personality, In this assignment, you will develop...

In this assignment, you will develop a ten item survey that will be given to all applicants at your company. The purpose of this survey is to determine whether the applicant is a p

Are service operation different from manufacturing operation, Q: Are servic...

Q: Are service operations different from manufacturing operations?  Ans: The immediate answer is yes. However, if we categorise operating systems by one of the variables mention

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd