beer wars essay

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EE481: Industrial Economics
SCP and NEIO
Dr. Wanwiphang Manachotphong
Department of Economics, Thammasat University

6 Sep 2013

Dr. Wanwiphang Manachotphong

EE481: SCP and NEIO

Structure
Conduct
Performance

Homework (Problem 1)
Due Date: Friday 13 Sep, before 2pm at the BE office.
Problem 1: Given the following travel requirements

You have to take a flight from Bangkok to ChiangMai on Friday
September 13th. AND
You have to leave between 8:00 AM - 10:30 AM.
1
2

How many airlines can you fly with? What are they?
What would be the price charged by each airline? (inclusive of tax,
VAT, and fee for 1 checked baggage) note: For this part, you MUST go through the actual online booking process until just before the website asks you to pay. Then, print out the page which shows the final price
(of each airline). Submit your print-outs with the homework. 3

Are the prices that you find very similar or very different? Do you think the airlines are being anti-competitive. Discuss why or why not. Dr. Wanwiphang Manachotphong

EE481: SCP and NEIO

Structure
Conduct
Performance

Homework (Problem 2 & 3)
** Adapted from Industrial Organization: A Strategic Approach by Church &
Ware. Practice Question in Chapter 10. You can also try other problems as your practice for the midterm exam.
Problem 2: Suppose that demand is given by P = 600 − Q and marginal cost equals 20. Firms are Cournot competitors and play a supergame. The collusive agreement being considered is for each to produce one-fourth of the monopoly output (there are 4 firms in this industry). What is the critical discount factor to sustain collusion using grim punishment strategies if detection of deviation requires three periods?
Problem 3: Suppose that demand is given by P = 600 − Q and marginal cost equals 20. Firms are Bertrand competitors with unconstrained capacity and play a supergame.
(a) For what values of the discount

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