solution

/in /by

Suppose that two oligopolistic retail chains are considering opening a new sales outlet in a particular town. The changes to each firm’s profits, depending on the actions taken, are given in the following payoff matrix. If a chain does not open a new outlet, it earns no addition to profits. If one of the chains is the only one to open an outlet, it makes high additional profits. If they both open outlets, they have to split the available market, and they make only more moderate additional profits.

Suppose that two oligopolistic retail chains are considering opening a new sales outlet in a...

a. If Firm 1 decides to open a new outlet, but Firm 2 does not open a new outlet, how much additional profit does each firm make?

b. If Firm 1 decides to open a new outlet, what is the worst that can happen to it? If Firm 1 decides not to open a new outlet, what is the worst that can happen to it? Which option, then, should Firm 1 choose, if it wants to make the choice that leaves it best off, regardless of what the other firm does?

 c. If the firms are noncooperative and each firm makes the choice that will leave it best off regardless of the other’s choice, what will the outcome be?

d. Is this like the “prisoner’s dilemma,” in which both parties could get a better outcome by communicating and cooperating?

e. Now suppose that each firm is thinking of opening new outlets in a number of towns, and each town has a payoff matrix similar to this one. Would there be advantages in having the two chains communicate and cooperate in this case? If they decide to collude, what form do you think their collusion might take?

 
"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"

solution

/in /by

On January 1, 2005, a three-decades-old system of global quotas that had limited how much China and other countries could ship to the United States and other wealthy nations ended. Over the next four months, U.S. imports of Chinese-made cotton trousers rose by more than 1,505% and their price fell 21% in the first quarter of the year (Tracie Rozhon, “A Tangle in Textiles,” New York Times, April 21, 2005, C1). The U.S. textile industry demanded quick action, saying that 18 plants had already been forced to close that year and 16,600 textile and apparel jobs had been lost. The Bush administration reacted to the industry pressure. The United States (and Europe, which faced similar large increases in imports) pressed China to cut back its textile exports, threatening to restore quotas on Chinese exports or to take other actions. Illustrate what happened and show how the U.S. quota reimposed in May 2005 affected the equilibrium price and quantity in the United States.

 
"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"

solution

/in /by

Argentines love a sizzling steak, consuming twice as much per capita as U.S. citizens. Thus, when the price of beef started to shoot up, Argentina’s President Nester Kirchner took dramatic action to force down beef prices. (Larry Rohter, “For Argentina’s Sizzling Economy, a Cap on Steak Prices,” New York Times, April 3, 2006.) He ordered government ministries to cease their purchases, prohibited the export of most cuts of beef, and urged consumers to boycott beef. But beef-loving Argentines, benefiting from higher wages due to a growing economy, largely ignored his call. When these actions failed to lower prices substantially, he turned to “voluntary” price controls (“encouraging” grocery chains and others not to raise prices for extended periods of time). Use graphs to illustrate this sequence of events.

 
"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"

solution

/in /by

Mr. Johnnie B. Good has a furniture business which he operates as a sole proprietor. The business has been doing well for several years and now he wants to finance the expansion of his business by way of a loan and he is thinking of approaching BCN Bank accordingly. He is also planning to buy a great deal of raw material on credit from Miller’s Hardware in support of the business expansion. Mr. Good in looking at the potential risks to his personal assets and in an effort to safeguard himself from losing his personal assets if the business failed and was not able to repay the loan or pay for the material he got on credit, filed the relevant documents with the Companies Office and Incorporated a private company, Good Furniture Ltd, with him as the sole shareholder and director and then went ahead and obtained a loan in the company’s name from the bank and bought the raw material on credit on behalf of the company. The bank in providing the loan, ensured that Mr. Good signed a personal guarantee for the entire loan amount.

Shortly after receiving the loan and the material on credit, the business faced severe competition from other furniture stores who imported much cheaper furniture and so the business failed and had no business assets to cover the loan or to pay for the material taken on credit.

BCN Bank and Miller’s Hardware both sued to recover their respective amounts and each is seeking to get a court order to have Mr. Good sell his personal assets to meet the obligations of Good Furniture Ltd. They are both saying that the one man company is merely a shield, to what is in essence a sole proprietorship business.

Using case law and statute, advise Mr. Good as to the likelihood of success of each claimant.


 
"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"