Suppose that there were two competing types of high-definition DVD players, Greenbeam and Mosdef. Greenbeam enjoyed an initial advanta market for high-definition DVD players because there were more motion-picture production companies offering movies compatible with its sy 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 fact that more consumers purchased Greenbeam players.
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- Suppose that there are two competing types of high-definition DVD players, Greenbeam and Mosdef, and each uses a different format. The DVD players are subject to network externalities: the more people who use one type of player, the more production companies adopt that particular format for their movies, and the greater the value of that player to each user. Greenbeam and Mosdef entered the market at around the same time. Which of the following is likely to happen if Greenbeam sells its DVD players at its profit-maximizing price, but Mosdef sells its DVD players at a much lower price than Greenbeam's at the early stages? 1 O Mosdef will dominate the market for high-definition DVD players. O Greenbeam will dominate the market for high-definition DVD players. O Greenbeam and Mosdef will have equal market shares. O Neither Greenbeam nor Mosdef will succeed, and a new company could easily enter and dominate the market. TrSuppose you are trying to determine the pricing for popcorn at a movie theater. There are just two types of customers (for simplicity assume just two total customers). One customer has a low demand for popcorn and will pay $1.00 for 16 oz of popcorn and nothing for a second 16oz. The high demand customer will pay $1.25 for the first 16oz and $0.50 for the second 16oz. If you charge one price for every 16oz a customer buys, what would you charge?Consider the monopoly platform model we studied in the lecture where both sides exert positive network effects on the other side. Is the following claim true? When the platform charges either transaction fees or access fees, strictly more sellers join the platform if strictly more buyers join the platform. Select one: True False
- You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: splishy splashers, raskels, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of splishy splashers decreases by 8%, the quantity of raskels sold increases by 6% and the quantity of kipples sold decreases by 8%. Your job is to use the cross-price elasticity between splishy splashers and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price…AT&T and Verizon have two pricing strategies: Set a high (monopoly) price or set a low (competitive) price. Suppose that if they both set a competitive price, economic profit for both is zero. If both set a monopoly price, AT&T makes an economic profit of $100 million and Verizon makes an economic profit of $200 million. If AT&T sets a low price and Verizon sets a high price, AT&T makes an economic profit of $200 mil- lion and Verizon incurs an economic loss of $100 million; if AT&T sets a high price and Verizon sets a low price, AT&T incurs an economic loss of $50 million and Verizon makes an economic profit of $250 million. Create the payoff matrix for this game. What is the equilibrium of this game? Is the equilibrium efficient?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…
- Provide an example of a company which operates on market as two one- sided platforms, describe sides and network effects.You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gumdrops, raskels, and cannies. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gumdrops decreases by 12%, the quantity of raskels sold decreases by 27% and the quantity of cannies sold increases by 3%. Your job is to use the cross-price elasticity between guppy gumdrops and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price elasticity…Exercise A.5 Consider a company with market power that sells its product to two distinct consumer groups (type 1 consumers and type 2 consumers). Graphically illustrate the following situation: "if you charge a single price only consumers of type 1 will be able to buy the product but, if you charge differentiated prices, the two types of consumers will be able to buy it"
- You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: guppy gummies, frizzles, and kipples. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of guppy gummies decreases by 5%, the quantity of frizzles sold decreases by 4% and the quantity of kipples sold increases by 6%. Your job is to use the cross-price elasticity between guppy gummies and the other goods to determine which goods your marketing firm should advertise together. Relative to Guppy Gummies Recommend Marketing with Guppy Gummies Cross-Price…Why does Pinterest see Google as its biggest competitor? Why does Pinterest prioritize the smartphone platform while developing new features and products?You work for a marketing firm that has just landed a contract with Run-of-the-Mills to help them promote three of their products: splishy splashers, frizzles, and cannies. All of these products have been on the market for some time, but, to entice better sales, Run-of-the-Mills wants to try a new advertisement that will market two of the products that consumers will likely consume together. As a former economics student, you know that complements are typically consumed together while substitutes can take the place of other goods. Run-of-the-Mills provides your marketing firm with the following data: When the price of splishy splashers increases by 10%, the quantity of frizzles sold decreases by 26% and the quantity of cannies sold increases by 14%. Your job is to use the cross-price elasticity between splishy splashers and the other goods to determine which goods your marketing firm should advertise together. Complete the first column of the following table by computing the cross-price…