You are the CEO of a brand-new dating app (BnDA). The number of users (i.e. total...

 

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You are the CEO of a brand-new dating app (BnDA). The number of users (i.e. total quantity demanded) for BnDA is: n = 1200-p+yne where y € (0,1), ne is the expected network size, p is the price. a) Interpret the parameter y. What strategies can a company like BnDA use to increase the value of y? (1 mark) b) Assume y = 0.4 and the users accurately anticipate ne so that n = n², and the marginal cost per user is 0. What is the profit maximising price? (2 marks) c) Suppose BnDA have an investment opportunity to acquire a start-up that can increase the parameter y from 0.50.4 to 0.9. What is the maximum amount BnDA should be willing to pay for this acquisition?¹ (2 marks) You are the CEO of a brand-new dating app (BnDA). The number of users (i.e. total quantity demanded) for BnDA is: n = 1200-p+yne where y € (0,1), ne is the expected network size, p is the price. a) Interpret the parameter y. What strategies can a company like BnDA use to increase the value of y? (1 mark) b) Assume y = 0.4 and the users accurately anticipate ne so that n = n², and the marginal cost per user is 0. What is the profit maximising price? (2 marks) c) Suppose BnDA have an investment opportunity to acquire a start-up that can increase the parameter y from 0.50.4 to 0.9. What is the maximum amount BnDA should be willing to pay for this acquisition?¹ (2 marks)