Choice of incumbent firm-behaviour of firms

Reference no: EM1317009

Suppose a buyer is willing to pay up to $250 for one unit of some good. There is currently only one supply of the good and supplying one unit of the good is $150. In the next period, a rival supplier may appear in the market. The rival's costs of supplying is not known but is assumed to be importantly distributed between [$100, $200].

Describe a long-term contract shoeing all necessary steps that the current supplier can offer the buyer that will be attractive to the buyer and will also strengthen the incumbent's monopoly power.

Reference no: EM1317009

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