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EF4484-Game-Exp-Internet Pricing - Copy (2)

EF4484-Game-Exp-Internet Pricing - Copy (2) - Economic...

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Economic Strategy and Game Theory Pricing on the Internet 1 In this experiment, each group will play the role of a retailer and compete with the others in trying to sell a product on the Internet. Like many online sellers, you buy a product after you receive purchase orders. Each product costs $10 to obtain from wholesalers. Others have a fairly identical cost structure. Apart from sunk marketing costs to attract loyal consumers, you have no additional costs of production or sales. The demand in this market comes from two segments of the consumers: Shoppers and Loyals. Shoppers view products being sold by you and all competing retailers as perfect substitutes. They simply buy from the retailer offering the lowest price provided that the price is below their willingness to pay, which is estimated to be $100. Loyals are consumers who, by virtue of past promotion activities, view your firm and its products as being far superior to any of your rivals. These consumers will buy from you regardless of what prices your rivals set so long as your price does not exceed their
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