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Managerial Economics - Coursework Example

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a) Describe the limit pricing strategy that could be used by a manager of a company that has market power in any particular industry and desires to keep challengers at bay and from entering the market. Recall, if a challenger should be able to enter the market, then the market…
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Managerial Economics
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Managerial Economics

Download file to see previous pages... This will put off the company that is to enter the market as the profit margin will seem to be very low and might even constitute to losses. This leaves the first company to enjoy monopolistic markets.
The manager of this company will reduce the products’ prices to monopolistic market prices there by enjoying the monopolistic profits. By decreasing the prices of the products the company that is to enter into the market will be discouraged as the profit margin will be very low and may also leading to losses.
The profitability of the firm with the marketing power will decrease with increase in capital interest as the borrowing costs increases there will be a decrease in supply there by attracting another company to satisfy the demand. This forces the companies to sell at a lower price than the monopolistic market price. If this continues, the company is bound to go into losses in the long run.
2. IHC hospitals are thinking of using a smart phone system to send health record data, laboratory test results data, and charge/payment data to the Mountain Star hospitals system when patients use any combination of medical services between the two hospital organizations. Mountain Star has been thinking of a similar idea of exchange. Going forward with such inter-hospital data communication means that a given data sharing network has to be developed. The cost savings involved in initiating such a system are the driving force of the decision but there are questions about these savings and the standard upon which the intercommunication is to be operated. The projected cost savings (in $millions) for each standard (Apple relative to Android) are given in the normal form payoff table below for each hospital conglomerate, with IHC cost savings given first in going from left to right.
It reflects a good technology. This is because independent of the smart phone mountain star opts for IHC will go for apple phone as it yields the best pay off. The ...Download file to see next pagesRead More
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