EBK ENGINEERING ECONOMY
17th Edition
ISBN: 9780134838229
Author: Sullivan
Publisher: PEARSON
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Question
Chapter 14, Problem 5P
(a):
To determine
Conclusion based on satisficing.
(b):
To determine
Consclusion based on Dominance.
(a):
To determine
Consclusion based on lexicography.
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Use a game tree to illustrate why an aircraft manufacturer may price below the current marginal cost in the short run if it has a steep learning curve.
(Hint:
Show that learning by doing lowers its cost in the second period.)
Part 2
Assume for simplicity the game tree is illustrated in the figure to the right. Pricing below marginal cost reduces profits but gives the incumbent a cost advantage over potential rivals. What is the subgame perfect Nash equilibrium?
Answer
M” method
Given the following model, solve by the method of “M”. (see image)
Chapter 14 Solutions
EBK ENGINEERING ECONOMY
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