Honest Abe and Cars R Us are two fiercely com- petitive car dealerships. Recently, both started...

 

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Honest Abe and Cars R Us are two fiercely com- petitive car dealerships. Recently, both started to sell Sniper Hybrid, a new model from Green Motors. Dealers' cost of the car is $19,600. Green Motors pays a dealership $300 for each car sold, and the dealership also keeps whatever markup it adds to the cost. Both dealers start selling the car at the price of $20,600. Immediately after the two dealerships started to offer the car, each decided to lower the price until the other dealership stopped selling the car. However, their price reduction policies differed. Honest Abe's policy is as follows: at the end of each day, the company sets the price for the next day at the competitor's price minus $50. Cars R Us's policy is the following: at the end of each day, the company sets the price for the next day at the competitor's price minus one percent. Each dealership decided to stop selling the car as soon as it sells a car at a loss instead of a profit. Using a spreadsheet application, enter the initial numbers and build a model that will help you answer the following questions: a. Which dealer will stop selling the car first? b. How many days after it starts to sell the car will this dealer stop selling it? c. How much money will this dealer lose per car on the first day it loses money on this car? d. If the Honest Abe changes his price reduction to $25, how will this change the results? Honest Abe and Cars R Us are two fiercely com- petitive car dealerships. Recently, both started to sell Sniper Hybrid, a new model from Green Motors. Dealers' cost of the car is $19,600. Green Motors pays a dealership $300 for each car sold, and the dealership also keeps whatever markup it adds to the cost. Both dealers start selling the car at the price of $20,600. Immediately after the two dealerships started to offer the car, each decided to lower the price until the other dealership stopped selling the car. However, their price reduction policies differed. Honest Abe's policy is as follows: at the end of each day, the company sets the price for the next day at the competitor's price minus $50. Cars R Us's policy is the following: at the end of each day, the company sets the price for the next day at the competitor's price minus one percent. Each dealership decided to stop selling the car as soon as it sells a car at a loss instead of a profit. Using a spreadsheet application, enter the initial numbers and build a model that will help you answer the following questions: a. Which dealer will stop selling the car first? b. How many days after it starts to sell the car will this dealer stop selling it? c. How much money will this dealer lose per car on the first day it loses money on this car? d. If the Honest Abe changes his price reduction to $25, how will this change the results?