1.   “If with 8 outlets we can reach every customer in Manhattan, there is no reason why we should open more than 8 outlets in Manhattan.” Comment.

2.   Microsoft bundles the majority of its products into a single package called Office. Explain standard economic reasons that underlie the business practice. Explain in detail strategic considerations that may lie behind Microsoft’s practice. How will  the suit of Google’s products that comes close to Microsoft Office change market  prices?

3.   Define strategic barriers to entry. How do they differ from fixed-cost entry barriers? Discuss two historical cases to explain how incumbents introduce entry barriers in concentrated markets.

4.   Why is predatory pricing unlikely to occur when all firms are identical or when no substantial sunk costs exist?

5.   Using a model of price predation, explain why driving a rival into bankruptcy does not, by itself, enable the predator to charge monopoly prices. Explain the credible commitment requirement for the success of predatory pricing.

6.   Why uncertainty is a key to the success of entry deterrence? Carefully elaborate on your answer by discussing entry deterrence strategies such as predatory pricing and limit pricing and excess capacity.

7.   Explain the credible commitment requirement for the success of predatory pricing.

8.   Between 1995 and 1997, American Airlines competed in the Dallas/Ft Worth Airport against several other low-cost carriers. In response to these low-cost carriers, American Airlines reduced its price and increased service on selected routes. As a result, one of the low-cost carriers stopped service, which led American Airlines to increase its price. Why do you think a lawsuit was filed against American Airlines? Why do you think American Airlines prevailed at trial?

9.   Pfizer markets a profitable drug Vioyly for which it holds patents which have been registered across different countries more than 12 years ago. Rivals have started developing generics to enter the market once the patents expire, which will erode Pfizer’s profit margin. Propose a pricing strategy that helps Pfizer maintain its market share. Define the pricing strategy precisely. State the conditions under which the strategy will succeed. Use a relevant graph to illustrate your analysis. Will the strategy require Pfizer to make any new investment?

10. How does industry-level price elasticity of demand shape the opportunities for making profit in an industry? How does firm-level price elasticity of demand shape the opportunities for making profit in an industry?