Question

Pc connection and cdw are two online retailers that compete in an internet market for digital cameras. While the products they sell are similar, the firms attempt to differentiate themselves through their service policies. Over the last couple of months, pc connection has matched cdw's price cuts, but has not matched its price increases. Suppose that when pc connection matches cdw's price changes, the inverse demand curve for cdw's cameras is given by p=1,400-2q. When it does not match price changes, cdw's inverse demand curve is p=1,100-0.5q. Based on this information, determine cdw's inverse demand function over the last couple of months.

Answer 1

The inverse demand function for CDW's cameras over the last couple of months can be determined based on PC Connection's price matching behavior.

Step-by-step explanation:

The inverse demand function for CDW's cameras over the last couple of months can be determined based on the given information about PC Connection matching price changes and not matching price increases.

When PC Connection matches CDW's price changes, the inverse demand curve for CDW's cameras is given by p = 1,400 - 2q.

When PC Connection does not match price changes, the inverse demand curve for CDW's cameras is given by p = 1,100 - 0.5q.