d) School 1 believes school 2 will adjust to its new profit maximizing solution each time school 1 adjusts its enrollment strategy. (Show calculations below.)
The demand curve for karate training in a community with only two martial arts schools is P = 100 – Q, where Q is in student-lessons. The cost of providing an additional student-lesson is $8/lesson. Complete the table below for the four cases described in a-d. There are no fixed costs.
a) Both schools get together and collude to price fix at a profit maximizing level.
b) Both schools assume that the other will hold the present tuition constant despite what the competition does.
c) Both schools assume that the other will hold the present enrollment constant despite what the competition does.
d) School 1 believes school 2 will adjust to its new profit maximizing solution each time school 1 adjusts its enrollment strategy. (Show calculations below.)
| Q of School 1 | Q of School 2 | Price ($/lesson) | Profit of School 1 | Profit of School 2 | |
| A | |||||
| B | |||||
| C | |||||
| D |
answer only D part
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