Essay on Profit Consequences

Two rival companies, ABC and XYZ, compete against themselves. Company ABC has its own goals on maximizing profits of their current quarter. On the other hand, company XYZ decides to pursue a plan of maximizing the quarter revenue (Deutsch, 2021). ABC company aims to maximize profits while XYZ focuses on the maximization of sales. However, the two firms’ pay-off matrix illustrates the gains made by ABC and the sales revenues for company XYZ.

XYZ has a dominant plan that charges the price of $5 for every unit. In circumstances whereby the ABC charges $ 10 for every team thus the best reply is to be able to charge 5 dollars and revenue of a minimum of 15 million dollars instead of charging 10 dollars that earn only 10 million dollars. However, suppose firm ABC is able to charge 20 dollars. In that case, the company’s response is to set a minimum of 5 dollars and is likely to earn a revenue of 15 million dollars instead of charging 10 dollars to make only 10 million dollars. The optimal price of company XYZ is 5 dollars for every unit. For company ABC to charge 20 dollars as part of its leading price plan, thus it is not advantageous for company XYZ to invest a capital of 2million dollars, therefore, taking the first mover benefits (Deutsch, 2021). In circumstances where company ABC can set the prices before XYZ, the company will charge20 dollars for every unit whereby company Xyz will be able to maximize the revenue. The company must invest a minimum of 2dollars in acquiring the first-mover benefits.

It is a method of metering or even parting with a razor to be able to sell edges. Consumers’ contrast enables the ability to able to pay for the experience of Barbie. Individuals who esteem a great deal are possibly purchasing several frills compared to individuals who appreciate less. The achievement of the adornments meter buyer’s enthusiasm to be able to pay for the experience. The higher edge for adornments limits Mattel to separate a considerable amount of excess from great kinds without losing low sorts. Mattel can set a lower commitment edge on Barbie Dolls rather than frill for dolls. Mattel is supposed to procure an extensive client base (Kühne, 2016). It can improve the importance of the Barbie Dolls; therefore, Mattel can convalesce the expenditures over adornments. Consumers are forced to buy higher edge decorations. On the other hand, the microwave maker has discovered that male consumers have very little interest in small waves compared to females. Female consumers esteem microwaves more than males, and the best part is the assets inducement to an auto-defrost.

References

Deutsch, Y. (2021). A polynomial-time method to compute all Nash equilibria solutions of a general two-person inspection game. European Journal of Operational Research, 288(3), 1036-1052.

Kühne, B. (2016). Mattel’s Second Attempt to Crack the Chinese Market: Will China Embrace the American Barbie Doll This Time?. In Market Entry in China (pp. 147-163). Springer, Cham.