Question

Suppose that two firms, A and B compete. They can choose different strategies – a combination of low price or high quality. The tables below show the best practice frontiers for each firm.

A’s Possibilities
Price .... Quality
0 .......... 12
1 ......... 8
2 ......... 4
3 ......... 0

B’s Possibilities
Price ..... Quality
0 .......... 6
2 .......... 4
4 .......... 2
6 .......... 0

What is the cost to A of 1 unit of high quality? What is the cost to B of 1 unit of high quality? What is the cost to A of 1 unit of price? What is the cost to B of 1 unit of price? Which firm should focus on high quality? Which on low price? Explain.



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  • CreatedSeptember 27, 2014
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