Sequence with the manufacturer deciding the whole sale price

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Here we have two important players: manufacturer (Hyundai, whose strategy is the wholesale price w) and retailer (car dealer, whose strategy is the retail price p). Moreover, they move in a sequence with the manufacturer deciding the whole sale price w first Eventually we can solve the Nash equilibrium (w, p). Note here the retailer (dealer)’s marginal cost is not 40 (manufacturer’s marginal cost), but the wholesale price w. The demand curve is given as P=240-Q. 1. Find Nash Equilibrium of this case. 2. What are the payoffs each firm get? 3. Now assume that Hyundai runs the retail shop. What would be changed? 4. Now assume that retailer has signed up as franchise with franchise fee of 3000. What would be changed? 5. Now assume that retailer has signed up as profit sharing with manufacturer takes 30% of retailing profit. What would be changed?

Reference no: EM131112336

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