Models of oligopoly and strategic interactions

Question

Question 1:

a)  The regression outcomes for the quantity demanded of good X is given by:

ln Q_X = 1220 – 9.5 ln P_X – 2.21 ln P_Y + 1.01 ln M
t values   (5.3)  (-5.12)      (-2.15)       (5.41)

Adjusted R² = 0.96 F statistics = 160.20   P value = 0.001

Here Q_X is the quantity demanded of X, P_X is the price of X, P_Y is the price of Y and M is the consumer income. Assess the above regression and describe how such results might be helpful to a manager.

b) The Wall Street Journal reports that the prices of PC components are expected to drop by 5 to 8 % over the next 6-months. With the help of proper diagrams, describe the likely impact and what the implications are for a manager in the given cases:

Case 1: If you are the manager of a small firm which manufactures PCs. 
Case 2: If you are the manager of a small software company.

Question 2:

a) Describe the argument which market entry erodes gains in the long run.

b) Give some reasons and describe possible strategies which are used for the profits to persist even in the long run. Give illustrations.

Question 3: Describe three models of oligopoly and describe the strategic interactions among firms regarding either pricing or output decisions in each case. Use illustrations to exemplify your answer.

Question 4: You are the manager of a reputed five star hotel in Mauritius and you have been asked by the director of the hotel to advice on possible pricing strategies to raise the revenue.

Explain the strategies that you would propose and why?

Question 5: Describe why and how government intervenes to enhance the allocation of the resources.