Question

PC Connection and CDW are two online retailers that compete in an Internet market for digital cameras. While the products they sell are similar, the firms attempt to differentiate themselves through their service policies. Over the last couple of months, PC Connection has matched CDW's price cuts, but has not matched its price increases. Suppose that when PC Connection matches CDW's price changes, the inverse demand curve for CDW's cameras is given by P= 1,400 -20. When it does not match price changes, CDW's inverse demand curve is P= 1,100 -0.5 Q. Based on this information, determine CDW's inverse demand function over the last couple of E months. P= O O O O qif Qs 200 Qif Q2 200 Over what range will changes in marginal cost have no effect on CDW's profit-maximizing level of output? $ O to O

Answer 1

when Price ceets are matched bul- I price rises are not there is a kena at the market demand curve which is determined at the price and Quantity where two demand wwe meet we find this Quantity as -) 1400-20 = 1,100 -0.50 >) 1400 -20 = 1,1000 - 059 300 =1.50 Henco cows inverse demand funchen pe 1100 -050 Or 900 LLOC -0.5(200) for couts invers demand p = 1,100-0.50 for 200 funchen o ley than

and p-1400-20 D-1400-20 foro. 8o Q more than 300 p1100 -0.50 to 92-900 p. 1400-29 to a 67,200 to find the Specifiled range we will have to calculate the marginal revenues obtained by two function al Q=200 Tohol revenue = PxQ Torp = 1400-28 Tohel revenue = (1400-20) Q | 1 - 9008 -28- Marginal revenue = dtpldQ =1400-2xQUA Emp21400 -40 Al Q = 200 = 1400-4(200) - lup - 800 $ 600 Pot TR = 1,100 - 0.582 MR = 1,100 - with a 200 MR= 2,100-200 = $900 30 the requined range P & 600 to $ 900 - which is to discontinuity of Jump and thees i intersechon & it with the marginal Cole (MC) cewe will not occune