Assume that two clothing manufacturers. Lands\' End and L.L. Bean, market their
ID: 1211367 • Letter: A
Question
Assume that two clothing manufacturers. Lands' End and L.L. Bean, market their goods strictly by mail order. Each produces an essentially identical field coat. The cost of producing such a coat is exactly $100. Because the field coats are perfect substitutes, customers will flock to the seller that offers the lowest price. If both firms offer identical prices, each receives half the customers. For simplicity, assume that the two firms have the choice of pricing at whole-dollar prices of S103, S102, or $101. Market demand at $103 is 100 coats; at $102, 110 coats, and at $101. 120 coats. The profit each firm would earn at various prices is shown in the payoff matrix below:Explanation / Answer
a. the equilibrium outcome is at $102
b. because of the collusion both the firms will gain
c. then the profitable levels changes
d. it will helps to decides the market demand for its product. if the competitors price is lower than LL Bean's price, definitely this strategy will helps them to get more sales.