ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
A) A retailer wants to sell some DVDs to 4 consumers (A, B, C and D). Assume there are only 4 DVDs in total to sell and that the retailer has committed to lowering the prices in period 2. The valuation to the different consumers are as follows:
Period 1 | Period 2 | |
Benefit to A and B | 700 | 400 |
Benefit to C and D | 400 | 100 |
In your hand written solutions, describe the first round
B) Now assume that there are only 2 consumers (A and C). The valuation to the different consumers are as follows:
Period 1 | Period 2 | |
Benefit to A | 700 | 400 |
Benefit to C | 400 | 100 |
In your hand written solutions, describe the first round price, second round price and profits for the retailer. Show all your calculations.
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