Given this situation Alcoas preference would have been to increase prices to

Given this situation alcoas preference would have

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Given this situation, Alcoa’s preference would have been to increase prices to iron/steel and aircraft consumers while generally reducing price to the other three markets. The potential for arbitrage, however, created a barrier to implementing this scheme. With wide price differences, nothing would prevent a cookware purchaser from undercutting Alcoa and reselling aluminum to an aircraft parts consumer. To successfully implement its price discrimination scheme, Alcoa was forced to forward integrate into the three relatively elastic markets. By moving into the cookware, electric cable, and automotive parts markets, Alcoa gained control over potential resales of aluminum ingot and was able to maintain high prices to the iron/steel and aircraft parts markets. TICKETMASTER/LIVENATION; Representative Conyers is holding hearings on the Ticketmaster/Live Nation proposed merger . An obscure Vanderbilt professor is scheduled to testify : Ticketmaster and Live Nation are both part of the vertical supply chain that delivers live performances to fans.The “price” of this service is the difference or “wedge” between what consumers pay and what performers receive. At one end of this chain are firms that interact directly with artists, such as Live Nation. At the other end are firms that interact directly with fans, such as ticketing firms like Ticketmaster who sell tickets on behalf of venues. The merger is interesting because it raises both horizontal (Live Nation has begun ticketing its own events) and vertical (Live Nation is Ticketmaster's largest customer) issues. The potential horizontal costs of the merger will have to be weighed against the potential vertical benefits, including increased coordination across the supply chain. 93
SECTION VII – WRAPPING UP 24. YOU BE THE CONSULTANT Excess Inventory of Prosthetic Heart Valves High Transportation Costs at a Coal-Burning Utility Overpaying for Acquired Hospitals Large E&O Claims at an Insurance Company Losing Money on Homeowner’s Insurance Quantity Discounts on Hip Replacements What You Should Have Learned Supplementary Material Epilog to the text Teaching Note I go through an overview of the material: where have we been; what have we learned and preview the exam. Also give a summary of the final exam—I give them the formulas in advance, and give them a description of the test. Summary of things they should now be able to do: Use the rational-actor paradigm, identify problems, and then fix them; Use benefit–cost analysis to evaluate decisions ; Use marginal analysis to make extent (how much) decisions; Compute break-even quantities to make investment decisions; Compute break-even price to make shut-down and pricing decisions; Set optimal prices and price-discriminate’ Predict industry-level changes using demand/supply analysis; Understand the long-run forces that erode profitability Develop long-run strategies to increase firm value; Predict how your own actions will influence others’ actions; Bargain effectively;

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