In a market with Cournot competition and fixed costs
市场营销作业代写 De jure standards are formal standards that are set by governments or committees of exports, with documents showing explicitly
Q1 市场营销作业代写
In a market with Cournot competition and fixed costs, entry will not always increase total welfare, unlike the situation with no fixed cost. In fact, it is possible that the fixed cost might make an entry that is profitable to the firm inefficient in terms of social welfare. Under specific conditions, we would have too many firms in the market than the socially optimal number.
Q2
EC uses structural or behavioral remedies to restore the necessary degree of competition in the market following a merger. The first type of remedy is divestment, i.e., “divestiture of a business or package of assets”. And one example is the merger between Dow and DuPont, where DuPont need to divest part of its pesticide business. The second type of remedy is the removal of links with competitors. One example is the acquisition of Telecom Italia by Vivendi, and Telecom Italia has to divest its stake in Persidera. 市场营销作业代写
Q3 市场营销作业代写
For an incumbent firm, it can prevent entry by a potential rival using the following methods: 1) product proliferation. That is, increasing the number of brands to deter entry: we can place differentiated products in the product space to fulfill all kinds of demands. 2) bundling, i.e., offering a product bundle with a more attractive total price; 3) exclusive contracts, i.e., offering a lower price but requiring the buyer to buy it exclusively; 4) vertical merger of upstream input providers; 5) limit pricing, i.e., set a price to persuades potential entrant that the market is not profitable enough.
Q4
De jure standards are formal standards that are set by governments or committees of exports, with documents showing explicitly the standards. De facto standards are informal standards that are determined by the market. Typically developed by a firm aiming to reap financial benefits. We shall prefer Dejure standards for safety concerns as well as for measurement problems, and sometimes for compatibility concerns. And the De facto standards are preferred for the economy of scale.
Q5a
The government should choose the optimal strategy by considering the following aspects:
First, if the fixed cost of setting up a new firm is very high (or it takes very long to build up new firms), then it is socially optimal to produce with only one firm. Then encouraging new firms would result in a waste of resources. On the other hand, the subsidy would move down the marginal cost curve, and the monopolist would produce more. 市场营销作业代写
Second, if the potential capacity of the monopolist is limited. Then we should encourage new firms to supply the additional capacity. Under that case, the subsidy would be useless if the monopolist hits its capacity limit.
Third, if the market demand for the product is sufficiently elastic, the subsidy would be more useful than setting up new firms, since a small number of subsidies would induce the monopolist to produce much more.
Finally, we should also consider the possibility of collusion between firms as well as the entry deterrence by the incumbent firm.
Q5b
A durable goods monopolist facing consumers with different valuations of a good would engage in intertemporal price discrimination if one of the assumptions of the Coase conjecture fails: 1) both consumers and the monopolist ‘live forever’; 2) the good has infinite durability; 3) the period between successive price adjustment tends to zero. Otherwise, the Coase conjecture holds, and the monopolist cannot profit from intertemporal price discrimination.
In practice, condition 1) is not likely to hold, especially for the consumers. Who have a time preference and would like to pay more for the consumption today rather than tomorrow. Condition 2) would also fail, since most good has finite durability, e.g., consumer electronics and vidio games. Finally, due to the menu cost, price adjustment cannot take place continuously. Finally, the firm could also make a credible commitment about quantity (“limited edition”, etc) or price (e.g., “most-favored-nation clause”) for intertemporal price discrimination.
Q7a 市场营销作业代写
Consider the model of horizontal product differentiation where consumers are assumed to be evenly spread along a unit line. And first assume the position of two firms is fixed at the two ends of the line, i.e., the Hotelling model. Consumers need to pay the price as well as the traveling costs. And the two firms engage in price competition, which results in upward sloping best reply curves and a unique equilibrium with positive markup.
Now, we allow these two firms to choose their position along the line. There are two forces affecting their decision: 1) direct effect: by moving closer to its competitor, a firm could lower the traveling cost for consumers between it and its competitor. Which then increases the firm’s market share; 2) strategic effect: but closer to its competitor also increases the degree of competition, and at the extreme case where both firms choose the same location, it is perfect Bertrand competition, hence no markup at all. 市场营销作业代写
On the other hand, by moving away from its competitor, there is greater horizontal differentiation, and each firm could enjoy larger market power and earn higher markup. To summarize, these two opposite factors would determine firms’ positioning choices, and the actual equilibrium would depend on model settings such as the functional form of the traveling cost, etc.
Q7b
Whether advertising reduces price competition and reduces consumer welfare depends on the nature of the ads, i.e.. Whether it is informative advertising which describes a product’s characteristics, or persuasive advertising which simply tries to convince the consumer that a product is good.
If it is informative, consumers would recognize the difference between products after watching the ads, and more importantly, remind the consumer of their preference for certain types of differentiated products. Then, it would reduce the degree of price competition. And consumer surplus would increase even though the price increases since consumers get what is right for them. 市场营销作业代写
If it is persuasive, then price competition is reduced, as consumers now recognize the difference between products. However, its welfare impact is obscure, since such recognition may be a true difference, but could be false. In the latter case, such ads would reduce consumer welfare.
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