How a usps rate increase would have affected the cournot

Reference no: EM131409847

An audit by the U.S. Postal Service (USPS) determined that Netflix return envelopes jammed automatic sorters, costing the agency $42 million in manual labor costs over two years. Consequently, the USPS proposed adding a 17¢ surcharge per envelope. If Netflix incurred this surcharge and did not change its behavior, its monthly operating income would have fallen by two-thirds from $1.05 per customer to 35¢, said Citibank analysts. These analysts observed that Netflix had more exposure to a USPS rate increase than did its main rival, Blockbuster, which did relatively more business in person than through the mail (Ned Randolph, "Netflix's Return Envelopes in a Jam," Video Business, December 5, 2007). Use a diagram to show how a USPS rate increase would have affected the Cournot equilibrium, given that Netflix and Blockbuster engaged in a Cournot competition but have different marginal costs

Reference no: EM131409847

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