Author Question: Lunch Counter The Lunchbox is one of many options for workers in Lanford, IL to get a quick and ... (Read 199 times)

Davideckstein7 · **on:** Jul 1, 2018

Lunch Counter The Lunchbox is one of many options for workers in Lanford, IL to get a quick and tasty meal at reasonable prices. They wanted to raise prices but did not know if the demand would fall off too much. They decided to raise prices and wait and see before making the increases permanent. In the first week after they raised prices on the menu an average of 10, they served fewer lunches but their revenue did not fall. Based on this, they decided to keep the new menu. Would you expect revenue to continue at this level?

Question 2

In the non-strategic sequential labor negotiation game:
a. The ability to commit to a strategy gives you an advantage
b. The ability to commit to a strategy gives your opponent an advantage
c. The ability to commit to a strategy is irrelevant
d. Players should simply not commit to a strategy to obtain an advantage

mathjasmine · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

Some customers do not patronize the Lunchbox every week. If they visited during the first week of the price increase, they may have stayed and purchased a meal there, but decided to visit less often in the future. In this case, demand becomes more elastic as more time passes. Because demand is more elastic in the long-run, they can expect quantity to fall further and revenues to begin to fall too.

Answer to Question 2

a