Music Pricing Downloads of digital entertainment goods, e.g., movies, songs, books, have marginal costs that are essentially zero. If so, what elasticity are the sellers adjusting prices to achieve?
QUESTION 2In the strategic view of bargaining the outcome depends on
a. Who makes the first move
b. Who can commit to a position
c. Whether or not the other party can make a countermove
d. All of the above
QUESTION 3Pricing to Competition When ShorTech introduced its Quadrant mobile phone, it had few competitors and so it set a price of 500 when its unit cost was 350 . The economics consulting firm it hired to estimate the demand elasticity confirmed this was the optimal price. Since then, entry has occurred that make customers more price conscious. When it rehired the economics consulting firm to estimate the demand elasticity, it found that demand had become more elastic at -4 . Also, it eked out cost savings and now has a unit cost of 300 . What price should ShorTech charge now?
QUESTION 4Would the shopkeeper be able to convince the customer that he would usher the customer out if he gets a low price?
a. Yes, such threats are always credible
b. No, because losing the sale is not in the shopkeeper's best interest
c. No, because he would get more by accommodating the low price than losing the sale
d. Both B&C
QUESTION 5Coffee Mug Pricing Manny's Merchandising can custom print logos onto coffee mugs. It sells it most popular style for 10 and has a marginal cost, including a blank mug and the printing, of 6 . Manny recently ran a diff-in-diff experiment and determined your demand elasticity is -5 . Should Manny raise or lower price?
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