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Memo 7 - Group Project

Memo 7 - Group Project

Q The goal of the project will be to use the principles and concepts from the course in an exercise where you gather and access real-world data and microeconomic conditions. Students will work with a partner to complete Memos 4, 7, 11, & 13 of the “Time Warner Cable” case. The case and memos appear on page 468 of our course textbook (Baye & Prince). Please read the case first. Then, work on the memos. The case starts on page 468. The memos are on pages 485-492. Please use an 11 font and one page per memo. All calculations and references should be included. Note: not referencing properly will result in point reduction on your score. If you quote a source, you must footnote it. The assignment will be assessed for correct grammar, sentence structure, and college-level writing. Your score will also be reduced appropriately if these requirements are not met. Please proofread your work. A project that is plagiarized will result in an automatic zero for the students’ work. All group members are responsible for making sure their group paper is free of plagiarism. The instructor will check submissions for plagiarism using Turnitin. All students in a group will receive the same grade. Please submit your document (Word or PDF format) using the following links: Memo 4 and Memo 13 – Due November 19, 11:59 PM Memo 7 and Memo 11– Due December 10, 11:59 PM Please also check the rubrics, they are available at the end of each submission page. (See: Memo 4 / Memo 13 / Memo 7 / Memo 11) You may check your group member by clicking the People > Group Project Time Warner Case Excel Files Time Warner Case Data Sheet: Epix (Links to an external site.) (Memo 4) Time Warner Case Data Sheet: Market Share (Links to an external site.) (Memo 13) Hints Here are some hints to help you with the memos: Memo 4 Hints: You need to start by estimating the demand function (as shown in Chapter 3). You can find MR from the inverse demand function (as shown in Chapter 8). In order to consider all possible prices (not only those on the excel spreadsheet), you need to find the (optimal) price and quantity by setting MR=MC. Make sure to calculate the profit-maximizing price, changes in profits, and changes in revenues. Memo 13 Hints: When you calculate the market share of each firm in the industry, please only consider the individuals or households who are actually purchasing the service. Further, in order to effectively calculate the HHI, you need to calculate the market share of each firm in the industry. Review Chapter 7 to review concentration measures (HHI) and DOJ Guidelines. Memo 7 Hints: Please review Chapter 10 very carefully and use the appropriate techniques. Show your calculations, analyze your strategy, and reach a conclusion. Memo 11 Hints: Make sure you write a short conclusion. Specifically, given your calculation, what do you find about the relationship between price and marginal cost? What do you find about the relationship between price and elasticity of demand? If you can explain intuitively why you find such relationships, it would improve your conclusion. You may review Chapter 3 and Chapter 11. If you have any questions, please post here: Group Project - Questions & Clarifications

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Total household in the relevant market is 110,000. If the company maintain the same price i.e., $79.95 than its market share is 65%. If the company charges 10% premium charges over its price, then its market share is 60%. The company's current position is it is charging the price above its competitor and this higher price is this 10% premium. Current price is $79.95 + 10% of $79.95 = $87.945. In this price its market share is 60% of total household. 60% of total household would be 110,000*60% = 110,000*0.60 =66,000. If there is demand of 66,000 under current price of $87.945, then it is total revenue under present condition is $87.945*66,000 = $5,804,370. This is the total revenue under the present situation.