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: Cengage Learning
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Question
Chapter 13, Problem 3E
A.
To determine
To Draw:A pay-off matrix based on the given data.
B.
To determine
To describe: On the given condition, the principal strategy for the former company.
C.
To determine
To describe: The principal strategy for the latter company.
D.
To determine
To describe: The strategies that the two firms should prefer.
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Suppose that two mining companies, Australian Minerals Company (AMC) and South African Mines, Inc. (SAMI), control the only sources of a rare mineral used in making certain electronic components. The companies have agreed to form a cartel to set the (profit-maximizing) price of the mineral. Each company must decide whether to abide by the agreement (i.e., not offer secret price cuts to customers) or not abide (i.e., offer secret price cuts to customers).
If both companies abide by the agreement, AMC will earn an annual profit of $30 million and SAMI will earn an annual profit of $20 million from sales of the mineral. If AMC does not abide and SAMI abides by the agreement, then AMC earns $40 million and SAMI earns $5 million. If SAMI does not abide and AMC abides by the agreement, then AMC earns $10 million and SAMI earns $30 million. If both companies do not abide by the agreement, then AMC earns $15 million and SAMI earns $10 million.
Complete the following payoff matrix using the…
Suppose that two mining companies, Australian Minerals Company (AMC) and South African Mines, Inc. (SAMI), control the only sources of a rare
mineral used in making certain electronic components. The companies have agreed to form a cartel to set the (profit-maximizing) price of the mineral.
Each company must decide whether to abide by the agreement (i.e., not offer secret price cuts to customers) or not abide (i.e., offer secret price cuts
to customers).
If both companies abide by the agreement, AMC will earn an annual profit of $36 million and SAMI will earn an annual profit of $24 million from sales
of the mineral. If AMC does not abide and SAMI abides by the agreement, then AMC earns $48 million and SAMI earns $6 million. If SAMI does not
abide and AMC abides by the agreement, then AMC earns $12 million and SAMI earns $36 million. If both companies do not abide by the agreement,
then AMC earns $18 million and SAMI earns $12 million.
Complete the following payoff matrix using the…
Suppose that two mining companies, Australian Minerals Company (AMC) and South African Mines, Inc. (SAMI), control the only sources of a rare mineral used in making certain electronic components. The companies have agreed to form a cartel to set the (profit-maximizing) price of the mineral. Each company must decide whether to abide by the agreement (i.e., not offer secret price cuts to customers) or not abide (i.e., offer secret price cuts to customers).
If both companies abide by the agreement, AMC will earn an annual profit of $30 million and SAMI will earn an annual profit of $20 million from sales of the mineral. If AMC does not abide and SAMI abides by the agreement, then AMC earns $40 million and SAMI earns $5 million. If SAMI does not abide and AMC abides by the agreement, then AMC earns $10 million and SAMI earns $30 million. If both companies do not abide by the agreement, then AMC earns $15 million and SAMI earns $10 million. What will be the payoff (in millions of dollars)…
Chapter 13 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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