Question:
Suppose you observed an acquisition by diversifying firm and that the aftermath of the deal included plant closings, layoffs, and reduced compensation for some remaining workers in the acquired firm. What would you need to know about this acquisition to determine whether it would be best characterized by value creation or value redistribution?
How would you characterize the nature of competition in the restaurant industry? Are there submarkets with distinct competitive pressures? Are there important substitutes that constrain pricing? Given these competitive issues, how can a restaurant be profitable?
Consider a monopoly producer of a durable good, such as a supercomputer. The good does not depreciate. Once consumers purchase the good from the monopolist, they are free to sell it in the "secondhand" market. Often in markets for new durable goods, one sees the following pricing pattern: The seller starts off charging a high price but then lowers the price over time. Explain why, with a durable good, the monopolist might prefer to commit to keep its selling price constant over time. Can you think of a way that the monopolist might be able to make a credible commitment to do this?