The Western Company is considering the addition of a new product to its current product lines. The expected cost and revenue data for the new product are as follows:
If the new product is added to the existing product line, then sales of existing products will decline. Therefore, the contribution margin of the other existing product lines is expected to drop $78,000 per year.
-Which lowest selling price per unit could be charged for the new product that would still make it economically desirable to add the new product?
Definitions:
Nash Equilibria
A concept in game theory describing a situation where no player can gain by unilaterally changing their strategy if the strategies of the other players remain unchanged.
Noncooperative Games
Noncooperative games are scenarios in game theory where players make decisions independently, without collaboration, often under the assumption that every participant is trying to maximize their own gain without concern for others' outcomes.
Behavioral Game Theory
An extension of game theory that incorporates insights from psychology to understand decisions in strategic situations where players interact.
Behavioral Economics
A field of study blending insights from psychology and economics to explore how individuals actually make decisions, often in ways that deviate from rational expectations.
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