i get it now...
so for part a:
profit for demand 100 = 100(8-3)=500
for 150 = 150(8-3)=750
for 200 = 150(8-3)=750
so expected profit = 500(25%)+750(50%)+750(25%)=687.5
for part b:
expected profit=500(25%)+750(50%)+1000(25%)=750
thanks for the thorough explanation
Two firms producing the same kind of product in quantities of q1 and q2, respectively:
Market clearing price p = a - b (q1 + q2)
Profit for firm i:
πi = (p – c) qi = [a - b (q1 + q2) – c] qi ,where c is the unit production cost.
Define B = (a – c)/b,
πi = b (B – q1 – q2) qi
Objective: choose...
Thanks! If this is the case then, the two questions will have the same answer?
This is my solution:
profit=8-3=5
expected profit per day=5(100)(25%)+5(150)(50%)+200(5)(25%)
Is this right?
Homework Statement
An ice-cream store makes 150 ice-cream balls every day. The cost of making each ice-cream ball is $3. The price of an ice-cream ball is $8. The demand distribution is as follows: 100 ice-cream balls with probability 25%, 150 ice-cream balls with probability 50%, and 200...
Homework Statement
Two retailers compete on price in a market. Firm 1’s demand depends on both its own price and firm 2’s price as follows: q1 = b – p1 + ap2. Similarly, firm 2’s demand depends on its own price and firm 1’s price: q2 = b – p2 + ap1. Their marginal costs of producing one unit of...