# 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

Adjusted R Square

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

Adjusted R Square

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

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