Professor Binmore Has a Monopoly in the Market for Undergraduate

question 33

Multiple Choice

Professor Binmore has a monopoly in the market for undergraduate game theory textbooks.The time-discounted value of Professor Binmore's future earnings is $4,000.Professor Ditt is considering writing a book to compete with Professor Binmore's book.With two books amicably splitting the market, the time-discounted value of each professor's future earnings would be $400.If there is full information (each professor knows the profits of the other) , under what conditions could Professor Binmore deter the entry of Professor Ditt into his market?

• A)Professor Binmore threatens to cut his price and attack the credibility of Professor Ditt's book so that Professor Ditt would loose $8.In so doing, Professor Binmore would still make $410 over time.
• B)Professor Binmore threatens to cut his price so that Professor Ditt would loose $800.In so doing, Professor Binmore would loose $80 over time.
• C)Professor Binmore threatens to cut his price so that Professor Ditt would loose $80.In so doing, Professor Binmore would just break even over time.
• D)Professor Binmore threatens to cut his price and attack the credibility of Professor Ditt's book so that Professor Ditt would only make $8.In so doing, Professor Binmore would still make $200 over time.
• E)None of the above.

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Definitions:

Woodworth's Personal Data Sheet

One of the first self-report inventories designed to assess psychological well-being, used initially for military personnel.

Objective Instruments

Tools or devices used in research or assessment that provide measurable and unbiased results.

Projective Instruments

Psychological assessment tools that use ambiguous stimuli to elicit responses that are thought to reveal hidden emotions and internal conflicts.

Mental Age

Mental age is a concept used to describe the level of intellectual development as compared to the average intellectual capacity of individuals at a particular age, often used in IQ testing.