Professor Binmore Has a Monopoly in the Market for Undergraduate

question 30

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 $2,000.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 $200.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 $210 over time.
• B)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 $100 over time.
• C)Professor Binmore threatens to cut his price so that Professor Ditt would loose $800.In so doing, Professor Binmore would loose $80 over time.
• D)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.
• E)None of the above.

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Definitions:

Powerlessness

The feeling or state of lacking control or influence over one's circumstances or environment, often leading to frustration or resignation.

Overly Supervision

An excessive level of oversight and control by managers or supervisors over the work and decisions of their subordinates.

Budget Expansion

An increase in allocated funds or resources for a project, department, or entire organization.

Socialized Charismatic Power

A form of leadership in which the leader's influence derives from their ethical behavior, altruism, and personal actions that benefit others.