11. Consider the interaction between a retailer and a manufacturer. The manufacturer's marginal cost is 2 and it sets the price p in the first stage of the game. The retailer purchases the product from the manufacturer at this price (so the retailer treats p as its marginal cost) and sells the product at price r in the second stage of the game (this makes the retailer's profit function (r- p)g). The market demand is q = 12 – 2r. What will be the prices set by the manufacturer and by the retailer?

11. Consider the interaction between a retailer and a manufacturer. The manufacturer's marginal cost is 2 and it sets the price p in the first stage of the game. The retailer purchases the product from the manufacturer at this price (so the retailer treats p as its marginal cost) and sells the product at price r in the second stage of the game (this makes the retailer's profit function (r- p)g). The market demand is q = 12 – 2r. What will be the prices set by the manufacturer and by the retailer?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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