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Discuss the importance of transaction costs. How are businesses harnessing the power of network effects during the COVID-19 pandemic?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter16: Government Regulation

Section: Chapter Questions

Problem 2.3CE

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Explain why the cost structure associated with many kinds of information goods and services might imply a market supplied by a small number of large firms. (At the same time, some Internet businesses such as grocery home deliveries have continually suffered steep losses regardless of scale. Explain why.) Could lower transaction costs in e-commerce ever make it easier for small suppliers to compete? As noted in the previous chapters, network externalities are often an important aspect of demand for information goods and services. (The benefits to customers of using software, participating in electronic markets, or using instant messaging increase with the number of other users.) How might network externalities affect firm operating strategies (pricing, output, and advertising) and firm size?
The French autoroute network is composed of toll motorways with entrances marked as such. A motorist entering the network obtains a ticket from a toll booth and pays a toll when leaving the motorway. Given the number of vehicles traveling these routes, congestion at both entrances and exits is common. Suppose that four groups, each of 50 motorists, use an autoroute. The price each group is willing to pay, v, differs among groups and falls as the amount of congestion, c, increases in the following way: vij = vi max-cj; i, j = 0,..., 3, where vi max = 0.4 -0.1 * i euros per kilometer is the maximum group i is willing to pay to use the motorway and cj = 0.06 * j euros per kilometer is the loss in value as more groups use it. The marginal cost of using the autoroute, not including the marginal cost of congestion, is zero. a. If the toll charged for using the autoroute equals a motorist's marginal private cost-the price in a competitive market-how many vehicles per minute will use it? Which…
Suppose that there were two competing types of high-definition DVD players, Greenbeam and Mosdef. Greenbeam enjoyed an initial advantage in the market for high-definition DVD players because there were more motion-picture production companies offering movies compatible with its system. Which of the following is an illustration of a network externality? Mosdef benefited from more consumers buying Greenbeam DVD players. O Consumers bought Mosdef players in increasing numbers, while Greenbeam lost market share and eventually went out of business. Consumers bought Greenbeam players in increasing numbers, while Mosdef lost market share and eventually went out of business. More production companies adopted the Mosdef format for their movies because the Mosdef player had the superior format, despite the fact that more consumers purchased Greenbeam players.
Can one company uses both ERP and SAP?
When would consumers and producers experience increased difficulty in coordinating their plans
Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The accompanying table shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Quick Burger Operates aDrive-Through Window Quick Burger Does NotOperate Drive-Through Window Quick Burger $ 24,000 $ 12,000 The Sunshine Café $ 15,000 $ 23,000 Suppose Quick Burger has the legal right to operate a drive-through window, and Quick Burger and the Sunshine Café can negotiate with each other at no cost. Which of the following arrangements would lead to the socially optimal outcome? Multiple Choice Quick Burger pays The Sunshine Cafe $10,000 to operate the drive-through window. Quick Burger pays The Sunshine Cafe $12,750 to operate the drive-through window.…
Кееp production $200 million $300 million Using what you know about the prisoner's dilemma, what would be the profit for Antel and constant IMD in millions? (cooperate Antel profit Antel profit is $20 million is $200 million Antel options IMD profit is IMD profit is $20 million $100 million Increase production (act independently) Antel profit Antel profit is $100 million is $300 million Antel profit: S million million IMD profit: S What would be the best collective option for both firms? Select all of the reasons Antel and IMD would make more profit at the original constant production level? соорerate Because overall demand for computer chips act independently will increase Because they can both charge more for the product at the given level of production Because it restricts the supply of computer chips
Question 4 is the benefit that customers receive from a good or service when others also are using the good or service. Brand loyalty B A network externality A total benefit A marginal benefit
1) Bargaining Adam has a car in good condition that he uses daily and that he values at 4000$. Blair values the same car at 4300$. Blair has 5000$ to spend. Adam has received an offer for 3500$ from a third party. a) What are the threat points for Adam and Blair? What is the surplus they could get from cooperating? What is the range of prices for the sale of the car that can support that cooperative outcome? b) Now suppose that the offer from the third party is 4200$. What are the new threat points? What is the new surplus of cooperation between Adam and Blair? c) Finally, suppose that the seller of a car has to pay a tax of 200$ and the buyer of a car has to pay registration fee of 150$. There is no offer from a third party. What are the threat points? What is the new surplus from cooperation? What is the range of prices that supports cooperation?
Based on the herfinfahl index of the market for sunglasses, the FTC would _______ a merger between UV shield and sun fashion.
Problem 1. Alice and Bob sell used CDs at music festivals. Each is deciding whether or not to set up their booth at the last festival of the summer. The festival is scheduled to take place in Alton, very near where Alice lives. It will cost her only $30 to travel the festival. Bob is farther away, and it will cost her $100 to travel to Alton. Both Alice and Bob would prefer to be only CD sellers at the festival, since they would avoid competition. If only one seller is at the festival, she will make $150 during the day (not counting travel costs). If both Bob and Alice sell CDs at the festival, they will lower their prices and each make $50 during the day. Both Alice and Bob receive $0 for not attending the festival. 1. Draw the Normal Form of the game Alice and Bob are playing, be sure to label the game completely. 2. Does either player have a dominant strategy? If so, what is it? 3. List all pure strategy Nash equilibria for this game. Remember that a Nash equilibrium is a strategy…