AEM4240mktprofile_ProblemSet - Market Proles For the...

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Market Pro¯les For the Competitive Strategy Game Pro¯le of Market A MARKET DESCRIPTION: Consumers in Market A consider di®erent brands to be usable substitutes if prices are su±ciently di®erent, but they do have favorite brands, which they will buy if prices are close to one another. Entry costs for market A are fairly low, and vary only somewhat across ¯rms. Production is capital intensive. PRODUCTION COST INFORMATION: Mean Entry Cost: $50000 Standard Deviation: $3000 Mean Cost of one unit of Capacity: $320 Standard Deviation: $60 Mean Marginal Cost: $50 Standard Deviation: $10 Percentage Depreciation of Capital in Period After Construction: 30% Percentage Depreciation of Capital in Following Periods: 10% Maximum Productive Life of a Unit of Capital: 4 periods Scrap Value at End of Capacity Life (as percentage of original value): 51% DEMAND INFORMATION: For the tables below, it is assumed that each ¯rm has su±- cient capacity to supply all of the demand for its product at the indicated prices: Information on Market Demand and the E®ect of Brand Proliferation: The cells show the total market sales on one occasion in which the indicated number of ¯rms each charged the same indicated price: Number of F i r m s i n M a r k e t 1234 Price 200 3434 3756 3861 3916 300 1508 1673 1863 1852 400 440 661 720 746 Information on Brand Substitution: The cells show the market share of ¯rm 1 on one occasion when there were two ¯rms in the market and ¯rm 1 charged the price shown in the lefthand column while ¯rm 2's price di®ered by the amount shown in the top row.
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AEM4240mktprofile_ProblemSet - Market Proles For the...

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