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tute_1ans - Hierachies incentives and firm structure...

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ECOS3003 Tutorial 1 1 Hierachies, incentives and firm structure ECOS3003 Tutorial 1 1. Question 3-14 in Brickley et al (2009), p. 101. At Locust Hill Golf club upgrade costs $6000. If benefit from better playing > $6000, then a member will vote yes At Salt lake Golf Club cost is $6000. Benefit is better course plus better resale price to new members; hence more likely to get a yes vote at Salt Lake. 2. What do you think will happen to the price and quantity of DVD players if: (a) The availability of good movies to play on DVD players increases? (b) Personal income increases? (c) The price of inputs used to produce DVD players decreases? (d) Ticket prices at local movie theatres decline substantially? a. Price rise; quantity rise b. price rise; quantity rise c. price fall, Q rise d. price fall, Q fall 3. At the time, many film makers argued that the advent of video would harm the film making industry. Assess this argument. Do you think your arguments apply to DVDs? Video introduced a new platform for viewing movies. Possible effects include This could increase demand for movies, increasing qty demanded for each movie Could allow for price discrimination; even without increasing market size could increase revenue for a movie Decrease demand for cinema watching, as people wait for video release (two platforms substitutes for many viewers) – this could reduce overall revenue. That is, it might be difficult to credibly commit not to release a video or only to do so at a high price – like a durable goods monopoly problem.
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