Fall 2012 Handouts

Oct 17: Gentex case study as pdf

Oct 8: Base Case Duopoly handout: duopoly.pdf

Oct 1: Discussed DB, and introduced 2×2 matrix games to analyze a dominant firm – fringe structure and a price war – Bertrand duopoly. We then looked at unstated assumptions: homogeneity, similar costs, no capacity constraints, and (to avoid a price war) an ability to distinguish market downturns from cheating. Next up: duopoly when firms compete on the basis of capacity rather than price.

Sept 28: Devil’s Backbone. Lots of stuff on economies of scale in terms of heat savings, bulk purchasing and (for the bottling line) capacity utilization (or at present, the lack thereof). That’s because in their investment decisions DB has placed a bet on achieving certain volumes, and they’re not there yet. We also heard lots on product differentiation, in this case in a discussion of price points when targeting chain stores such as Kroger, and the need to be able to deliver volumes so that retailers never stock out. If they try to expand too fast, they’ll not be able to deliver as much as their customers mandate, and since they’re not the only brewery out their in their niche, they’ll lose that customer. A Krogers or a Harris Teeter moves a lot of beer, but none of their brands is so important as to make them willing to keep part of their shelves empty. Of course if they expand too fast on the capital expenditure side and then can’t get additional customers (or have a quality problem and lose one) they’re dead.

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