Managerial Economics: A Game Theoretic Approach Essay

Using computations from Assignment 1, determine the commercialize structure in which the low-calorie frozen, microwavable diet family operates.The commercialise structure that this c altogetherer is likely to be in is the oligopoly structure whereby it could be in a duopoly or not. A duopoly is a market structure in which there be few unanimouss in the industry. It is a market structure that lies between two market structures, that is, perfectly competitive market and monopoly. There are two or to a greater extent sellers but the number of sellers is not as large as that of the matchlesss stick out for in a perfectly competitive market. The steadfastly can be categorized as a monopoly mainly because of the cross sectional assume of the firm. The cross scathe elasticity petition of this situation firm is 0.68. This exactly means that an subjoin in the prices of the competitors growth by one whole implies a 0.68 unit ontogenesis in cost of the touchstone demanded . This basically implies that the cross sectional demand in inelastic. As such, the increase in price, decrease in price or generally the turn of prices by this particular firm volition not produce a earthshaking effect in terms of the quantity demanded. This is the ideal representation of a firm in an oligopoly. The scope for mortal action can be said to be appearance greater than in the case that the product was differentiated. In other words, one individual seller does not stand to lose in the case that he or she decides to charge a higher price. For this reason, this firm is definitely chthonian an oligopoly market structure.(Webster, 2003)Outline a plan that give assess the effectiveness of the market structure for the alliances operationsThe issue of prices is basically the basis of the plan that is to be formulated. Generally, the price quantity combination depends upon the actions that are taken by the pass off of the firms in the duopoly. In other words, the pro fit that is accrued by for from each one one and every seller is a result of the decisions that have been reached by each individual seller. The monopoly price that leave be charged under this market structure could come with a series of consultations or s refer individual experiments. For this particular firm to maximise its profits it needs to fix its price through an analysis with the assumption that there exists only one firm in the market. In the event that the firm fixes its price higher than this price, it will make gains. In the event that it fixes the price lower, it will lose.Given that argument operations have changed from the market structure specified in the superior scenario in Assignment 1, determine two (2) likely agents that might have ca utilise the change. Predict the primary manner in which this change would likely cushion business operations in the new market environment.The assumed market structure was that the firm was under a perfectly competitive mar ket. It besides turns out that the firm is in an imperfect market, a duopoly precisely. There are a number of f actors that are likely to have caused the change in this market structure. One of the reasons is that there probably existed one factor of production that is owned by a few firms only. As a result, not many firms are able to produce the product. Besides, it is also a possibility that there existed many firms initially in the market under a perfectly competitive market. These firms could have decided to merge thenceforth and consolidated themselves into one major firm with the aim of reducing controversy. In this way, the number of sellers reduces.Analyze the major short run and long toll chromosome mappings for the low-calorie, frozen microwaveable food company given the appeal functions below. offer of the essence(p) ways in which the low-calorie food company may use this information in order to make decisions in both the short-run and the long-run.TC = 160,000,00 0 + 100Q + 0.0063212Q2VC = 100Q + 0.0063212Q2MC= 100 + 0.0126424QThe total comprise function is an increasing function of quantity produced. This implies that an increase in the quantity produced results to an increase in the embody of production. This is consistent with economic theory. The intercept of the total cost function is 160,000 heart and soul that when no quantity is produced, or rather when the quantity produced is zero, the fixed cost is 160,000. The Marginal Cost function is also an increasing function of quantity produced. It gives the effect of producing an extra unit. The firm should thereby produce up to a level whereby the cost of producing an extra unit does not exceed the returns from that particular unit.(Hirschey, 2008)Determine the possible circumstances under which the company should discontinue operations. Suggest key actions that management should take in order to confront these circumstances. brook a rationale for your responseThe firm should disconti nue its operations in the case that the Total costs are more(prenominal) than the total gross. This would imply that the firm is making freeinges. The firm should also discontinue its operations in the event that the marginal costs are greater than the marginal receipts. That is, the cost of producing an additional unit is greater than the cost of selling that additional unit. The firm should also discontinue its operations in the event that the marginal revenue is zero or less. This is with regard to the law of diminishing marginal revenue which holds that the revenue from selling an additional unit will increase to a point where an additional unit of input will not increase the quantity produced. In this case wherefore, extra costs will be incurred in the process of producing an extra unit but revenue will not change. This is an unproductive phase of production.Suggest one (1) pricing polity that will enable your low-calorie, frozen microwavable food company to maximize profi ts. yield a rationale for your suggestion.At ceteris Paribus, the demand function of the market isThe demand equation will be as shown below, with all other factors held eonianQ = -5200 42*(P) + 20*600 + 5.2*5500 + 0.2*10000 + 0.25*5000Q = 38650 42(P)P = 38650/42 (Q)/42The proportion prices and quantities are5200 + 45P=38650 42P33,450=87PP = 384.48Q = 5200 + 45*(384.48) = 22,501.6Total Revenue = Price X Quantity = 38650/42 (Q)/42QMR= 38650/42 = 920. 23 = PThe intermediate revenue should be equal to the price and give the demand function. The outperform pricing solution that this firm can and should make is to produce at this price.Outline a plan, based on the information provided in the scenario, which the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions.Being a fi rm under the oligopoly market structure, the firm should put the concept of price leadership into practice. Essentially, this manifestly implies that the firm should be able to put itself out as a dominant firm and as such it should be able to argument the authority to set the prices in the market. It should also be able to be the firm that commands any change when it comes to prices in such a way that it has the ability to change prices while the other firms follow suit. The firm therefore is in a situation in which it is able to control prices to its benefit. As a consequence, the other competing firms will not be able to maximize their own profits unless they follow the prices that are set by this firm. In other words, a special monopoly is created in the duopoly. (Washick, 2005)Recommend two (2) actions that the company could take in order to improve its profitability and deliver more value to its stakeholders. Outline, in brief, a plan to implement your recommendations.Due to the homogenization of products, there is the problem of competition especially among the buyers. This simply implies that there will be one single price for sellers. As a result, the take up recommendation with regard to the action that the firm should take is to ensure that they maximize on output. A change in terms of output by the seller has a very significant effect in terms of the prices of the good that is produced. As much as the actions of his or her rivals could be clean unknown, it is most definite that the other sellers will change or bowdlerise the prices in a way that they will match the output. An increase in terms of the output also implies that the firm will also increase its revenue.The Collusion Solution is also another recommendation that could be used by this particular firm in question. This basically implies that the market participants could invariably try and join together in the event that the participants find that the competition is too much, they co uld join together so as to create one competitive firm. (Waschick,2005)ReferencesFisher, T., & Waschick, R. (2005). Managerial Economics A Game Theoretic Approach. capital of the United Kingdom Routledge.Hirschey, M. (2008). Managerial Economics. New York Cengage Learning.Webster, T. J. (2003). Managerial Economics Theory and Practice. London academic Press.Source document