Q3. Nike has market power in the running shoe market and has identified two groups of...
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Q3. Nike has market power in the running shoe market and has identified two groups of potential customers for Nike running shoes, avid runners (A) and bargain seekers (B). Separately, the demand for these groups are as follows: 9A = 2-0.5PA 9B = 1 - PB Note that quantity demanded can't be negative. For simplicity, assume zero costs. Initially, Nike is only able to sell both groups one type of shoe for a single price (p). a. Find the combined demand curve. (Remember, quantity demanded can't be negative, so there will be a "kink" in the curve where the bargain hunters buy zero shoes.) b. Find the optimal price and quantity {q,p} given Nike can only set a single price. (Remember, there are two ways Nike might maximize profits due to the kink in the demand curve.) Q3. Nike has market power in the running shoe market and has identified two groups of potential customers for Nike running shoes, avid runners (A) and bargain seekers (B). Separately, the demand for these groups are as follows: 9A = 2-0.5PA 9B = 1 - PB Note that quantity demanded can't be negative. For simplicity, assume zero costs. Initially, Nike is only able to sell both groups one type of shoe for a single price (p). a. Find the combined demand curve. (Remember, quantity demanded can't be negative, so there will be a "kink" in the curve where the bargain hunters buy zero shoes.) b. Find the optimal price and quantity {q,p} given Nike can only set a single price. (Remember, there are two ways Nike might maximize profits due to the kink in the demand curve.)
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a To find the combined demand curve we need to consider the demand functions for both groups and account for the kink where the bargain hunters buy ze... View the full answer
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date:
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