a firm would prefer blockaded entry to deterable entry

ECON Homework for Chapter 6

ECON Homework for Chapter 6

Question

Homework for Chapter 6, Adapted End-of-chapter Questions
(10 points
possible)

Dunne,
Roberts, and Samuelson found that industries which have high entry rates, tend
to also have high exit rates.
Can you explain this finding?(1 point)
What does this imply for pricing strategies
of incumbent firms?(1
point)
.0pt;’=”” list=”” lfo1;=”” level1=”” l0=”” 0pt;=””>“All
else equal, a firm would prefer blockaded entry to deterable entry.” Explain. (2 points)
7. How HEB
behaves toward Walmart is a major determinant of whether it will face entry by
new competitors. Explain. (2
points)
.0pt;’=”” 0pt;=””>9. Suppose HEB considers
expanding the capacity of its fresh sushi making equipment at its stores at the
corner of SPID & Staples and at the corner of SPID & Waldron. It can do
so in one of two ways: (1) HEB can purchase fungible, general-purpose equipment
that can be resold at close to its original value. Or (2) HEB can invest in
highly specialized equipment which, once in place, has virtually no salvage value.
Assuming that each choice results in the same production costs once installed,
under which choice is the HEB likely to encounter greater likelihood of entry into
fresh sushi-making by Walmart and other potential competitors, and why? (2
points)
.0pt;’=”” 0pt;=””>
.0pt;’=”” 0pt;=””>14. Consider
HEB selling two products, Hill Country Fare chicken fajitas and Tyson chicken
fajitas, which substitute for each other. Suppose that Walmart introduces Great
Value chicken fajitas, a product that seems to the typical consumer to be identical
to Hill Country Fare chicken fajitas. Being careful to consider factors that
may affect the following:
.0pt;’=””>
.0pt;’=””>(a) Will a price war be initiated? (1 point)
.0pt;’=””>
.0pt;’=””>(b) If so, which firm would be more likely to win the
price war? (1 point)

ECON Homework for Chapter 6

 
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