Boulder has several ski and snowboard retailers that sell similar brands. Prices across these retails are relatively stable during preseason (ski/snowboard season) and midseason, but become volatile postseason. For the past few years, when one retailer slashed prices (especially postseason), other retailers followed suit. All retailers behave as oligopolists. Suppose that retailer A faces an inverse demand of p = 1,500 – 1.5Q, when the other retailers match retailer A’s price changes, and p=1200 – 0.7Q, when the other retailers don't match retailer A’s price changes. Suppose also that retailer A's cost function is C(Q) = 20,000 + 10Q + 0.8Q2. Question: Under these conditions, what is the most profit retailer A can make
Boulder has several ski and snowboard retailers that sell similar brands. Prices across these retails are relatively stable during preseason (ski/snowboard season) and midseason, but become volatile postseason. For the past few years, when one retailer slashed prices (especially postseason), other retailers followed suit. All retailers behave as oligopolists. Suppose that retailer A faces an inverse demand of p = 1,500 – 1.5Q, when the other retailers match retailer A’s price changes, and p=1200 – 0.7Q, when the other retailers don't match retailer A’s price changes. Suppose also that retailer A's cost function is C(Q) = 20,000 + 10Q + 0.8Q2.
Question: Under these conditions, what is the most profit retailer A can make?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps