I would like to ask what is the optimal price Daily News should charge. I agree with what the answer says until the last part.

I would like to ask what is the optimal price Daily News should charge. I agree with what the answer says until the last part. I think Daily news should charge 62 cents, and the answer is wrong. However, some of my classmates also say it is 57cents. So I am confused. (b) Suppose that prices are set only once but each newspaper has complete flexibility as to what
price to charge (rounded off to the nearest penny). price should the Daily News charge?
Explain. Optimal price for News follows the function: PN = 0.26Pp + 47.46
A similar regression analysis is performed for New York Post to determine where profit will be
maximized.
REGRESSION FOR QUANTITY NEW YORK POST
Regression Statistics
Multiple R
0.983273494
R Square
0.966826765
0.965247087
Standard Error
27.72148641
Observations
45
ANOVA
df
Regression
2
Residual
42
Total
44
Coefficients
Intercept
751.7612625
D News Price
11.89121825
NY Post Price
-15.9162351
Quantity Demanded Formula for New York Post
Qp = -15.92Pp + 11.89PN+ 751.76
Pp = -Qp/15.92 + 0.75PN + 47.22
Revenue is equal to Quantity*Price
Rp = Qp * Pp = Qp (-Qp/15.92 + 0.75PN + 47.22)
MRp = -0.125Qp + 0.75PN + 47.22
Optimal Quantity is where MRN = MCN
Our MCp = Marginal Cost + Depreciation Cost = 0.12 + 0.08 = 0.20. For our usage 0.20 = 20
-0.125Qp + 0.75PN + 47.22 = 20
QP = 217.76 + 6.00PN
Pp = -(217.76 + 6.00PM)/15.92 + 0.75PN + 47.22
Pp = 0.37PN+ 33.54
Optimal price for Post follows the function: Pp = 0.37PN + 33.54
Our Nash Equilibrium is where these two curves intersect as an iterative process would lead
both Daily News and the New York Post to charge this price to maximize profits: Optimal price for News follows the function: PN = 0.26Pp + 47.46
A similar regression analysis is performed for New York Post to determine where profit will be
maximized.
REGRESSION FOR QUANTITY NEW YORK POST
Regression Statistics
Multiple R
0.983273494
R Square
0.966826765
0.965247087
Standard Error
27.72148641
Observations
45
ANOVA
df
Regression
2
Residual
42
Total
44
Coefficients
Intercept
751.7612625
D News Price
11.89121825
NY Post Price
-15.9162351
Quantity Demanded Formula for New York Post
Qp = -15.92Pp + 11.89PN+ 751.76
Pp = -Qp/15.92 + 0.75PN + 47.22
Revenue is equal to Quantity*Price
Rp = Qp * Pp = Qp (-Qp/15.92 + 0.75PN + 47.22)
MRp = -0.125Qp + 0.75PN + 47.22
Optimal Quantity is where MRN = MCN
Our MCp = Marginal Cost + Depreciation Cost = 0.12 + 0.08 = 0.20. For our usage 0.20 = 20
-0.125Qp + 0.75PN + 47.22 = 20
QP = 217.76 + 6.00PN
Pp = -(217.76 + 6.00PM)/15.92 + 0.75PN + 47.22
Pp = 0.37PN+ 33.54
Optimal price for Post follows the function: Pp = 0.37PN + 33.54
Our Nash Equilibrium is where these two curves intersect as an iterative process would lead
both Daily News and the New York Post to charge this price to maximize profits: (56.54, 62.16)
(56.54. 62.16)
10
120
The blue line represents: PN = 0.26Pp + 47.46
The purple line represents: Pp = 0.37PM+ 33.54
The Y-Axis is PN and the X-Axis is Pp.
This means the Daily News should charge \$0.57 per copy. 1
SR
11
*
PN = 0.26 Pp + 47.46 –
Pp = 0.37 PM + 33.54
2
sub 1 into
Pp = 0. 37 ( 0. 26. Pp + 47. 46 ) + 33.54
Pp = 0.0962 Pp + 17.56 + 33.54
0. 9038 P. = 51.1
Pp = 57 cents
Sub 2 into 1
PN = 0.26 (0.37 PN + 33. 54) + 47.46
Py =0. 0962 PM + 56. 18
OOIN 9010
PN = 62 cents
APR
13
N
A
1
w
MacBook Pro

0 replies