Consider a game with 5 buyers (denoted buyer1 through buyer5) and 4 sellers (den

Question

Consider a game with 5 buyers (denoted buyer1 through buyer5) and 4 sellers (denoted sellerA through sellerD) of a differentiated product. All buyers are in the market for a single unit, and each seller has a single unit to sell. All sellers have a marginal cost of $10 for their product. Buyers’ willingness to pay for the products is as follows,

buyer1 is WTP $180 for product A and is not considering any other products. ?

buyer2 is WTP $165 for product A, and $170 for product B and is not considering any other products. ?

buyer3 is WTP $165 for product B, and $170 for product C and is not considering any other products. ?

buyer4 is WTP $100 for product C, and $100 for product D and is not considering any other products. ?

buyer5 is WTP $80 for product D and is not considering any other products. ?

What general conclusion you can make about games with this structure? Note that firm A and firm D face a separate and distinct set of customers for their products.

Explanation / Answer

From the above data it is clear that what price each buyer is willing to pay for a product from different firms.

Business is all about profits. So sellers will be willing to give the product to the customer who is paying good amount for their product.

As we can see that buyer 1 is willing to pay $180 for product A which is more than the amount that buyer 2 is will to pay for the product. So buyer 1 gets product A.

The same criteria we can see in all other cases so the conclusion we get from the above cases is that

Buyer 1 buys product A

Buyer 2 will get product B

Buyer 3 will get product C

Buyer 4 will get product D

Buyer will not have any product to buy.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.