2007 Midterm #2

Part I: Identifications & short answers. Remember to use our jargon; refer explicitly to our models; remember the “so what” questions.

Allocate 8 minutes each to leave yourself a bit of extra time.

A. Disneyland pricing.

B. Volume discounts.

C. Hotelling.

D. Search costs.

E. Advertising intensity.

F. Persuasive advertising.

Part II: Discuss franchising from the perspective of vertical relations, using the reading on Domino’s.

You may want to touch on some of the following themes. You do not need to cover everything (time is precious – you can’t cover everything!) so pick and choose thoughtfully to provide a coherent set of arguments or points. Is there a double marginalization issue with Domino’s? What externalities, positive and negative, affect this franchise system? Can Domino’s dictate terms to its franchisees – does it have some form of market power? How (if at all) does that translate into profits? If the franchiser can make so much money, then how can franchisees be successful – what’s in it for them?

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