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Essay Details:
Essay text:
What are the key assumptions behind the "Contribution Matrix" in Exhibit 4 of the case? How reasonable are these assumptions given the market information that James Vaughan has been able to gather? Given the assumptions, does the matrix reflect the correct objective functions (i.e. what should be maximized) for the two firms?
The game is played only once. Best objective for LAL : KL@1900 – LAL@1600 Best objective for KL: KL@1700 – LAL@1900
3. If the values in the Contribution Matrix are, in fact, reasonable, what action would you recommend to LAL management? How should they actually implement your recommendation?
According to the contribution matrix there is an equilibrium at KL@1400 – LAL @1300 (1008, 895)...
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