Almeida

The two largest diner chains in Kansas compete for weekday breakfast consumers. The two chains, Golden Inn and Village Diner, each offer weekday breakfast customer a �breakfast club� membership that entitles customers to a breakfast buffet between 6:00 a.m. to 8:30 a.m. Club membership are sold as �passes� good for 20 weekday breakfast visits.

Golden Inn offers a modest but tasty buffet, while Village Diner provides a wider variety of breakfast items that are also said to be quite tasty. The demand functions for breakfast club memberships are:

QG = 5,000 � 25PG + 10PV
QV = 4,200 � 24PV + 15PG

Where QG and QV are the number of club memberships sold monthly, and PG and PV are the prices of club memberships, both respectively, at Golden Inn and Village Diner chains. Both diners experience long run costs of production, which are

LACG = LMCG = $ 50 per membership
LACV = LMCV = $ 75 per membership

The best response curves for Golden Inn and Village Diners are, respectively,

PG = BRG(PV) = 125 + 0.2PV
PV = BRV(PG) = 125 + 0.3125PG

a. If Village Diner charges $ 200 for its breakfast club membership, find the demand, inverse demand, and marginal revenue functions for Golden Inn. What is the profit maximizing price for Golden Inn given Village Diner charges a price of $ 200? Verify mathematically that this price can be obtained from the appropriate best response curve given above.

b. Find the Nash equilibrium prices for the two diners. How many breakfast club memberships will each diner sell in Nash equilibrium? How much profit will each diner make?

c. How much profit would Golden Inn and Village Diner earn if they charged prices of $ 165 and $ 180 respectively? Compare these profits to the profits in Nash equilibrium (part c). why would you not expect the managers of Golden Inn and Village Diner to choose prices of $ 165 and $ 180 respectively?

  1. 👍 0
  2. 👎 0
  3. 👁 170
asked by Pedro
  1. Please type your subject in the School Subject box. Any other words, including obscure abbreviations, are likely to delay responses from a teacher who knows that subject well.

    Also, please understand that no one here will do your work for you. However, we will be happy to read over whatever you come up with and make suggestions and/or corrections.

    Please post what you think.

Respond to this Question

First Name

Your Response

Similar Questions

  1. Economics for Manager

    Hello, Could someone please help me find the answer to this question: The two largest diner chains in Kansas compete for weekday breakfast consumers. The two chains, Golden Inn and Village Diner, each offer weekday breakfast

    asked by Daniel on December 7, 2010
  2. Math

    The soccer team is selling key chains to raise money for the team. They ordered 100 key chains that sell for .25 each. There is a flat shipping rate of $8. The team sells the key chains for $2 each. With that information, I

    asked by Nevaeh on December 3, 2017
  3. Biology

    Why does Beta Glucose chains have more weak bonds between the chains than there are between alpha glucose chains?

    asked by Craig on October 9, 2011
  4. biology

    Explain the importance of carbon's ability to form covalent bonds in straight chains, branched chains, or rings.

    asked by brittany on January 24, 2012
  5. Biology

    Explain the importance of carbon's ability to form covalent bonds in straight chains, branched chains, or rings.

    asked by tiffany on January 20, 2011
  6. biology

    40. Explain the importance of carbon's ability to form covalent bonds in straight chains, branched chains, or rings. (3 points)

    asked by Bishara oey on January 18, 2011
  7. calculus

    A box weighing 450 N is hanging from two chains attached to an overhead beam at angles of 70 degrees and 78 degrees to the horizontal. Determine the tensions in the chains.

    asked by Sam on February 14, 2010
  8. physics

    An amusement park ride consists of a rotating circular platform 8.09 m in diameter from which 10 kg seats are suspended at the end of 2.19 m mass less chains. When the system rotates, the chains make an angle of 14.8 ◦ with the

    asked by Anonymous on December 9, 2014
  9. Organic Chemistry

    I want to confirm some things on solubility and boiling points(they might be right or wrong): - If a substance is soluble in water then it also has a high boiling point - If a substance has a high intermolecular force then it also

    asked by rinchan on October 29, 2013
  10. Social studies

    What are the mountain chains of Europe? How did these mountain chains encourage the development of distinct cultural regions?

    asked by Lorenzo (Lj) on November 12, 2019

More Similar Questions