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06 Feb 2009, 00:05
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Company A assembles PC-laptops.
It has received a price quote for CPU (one of its critical component) from Company B, which is willing to sell it to Company A at a price of $35. However, there is 50% chance that Company B's CPU price can be lowered to 20%, e.g. $28.
Company A is about to begin its negotiations with Company C, another supplier of CPUs. What is Company A's reservation price, e.g., the most it will pay for Company C's CPUs?
It has received a price quote for CPU (one of its critical component) from Company B, which is willing to sell it to Company A at a price of $35. However, there is 50% chance that Company B's CPU price can be lowered to 20%, e.g. $28.
Company A is about to begin its negotiations with Company C, another supplier of CPUs. What is Company A's reservation price, e.g., the most it will pay for Company C's CPUs?
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06 Feb 2009, 08:49
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Since the chance of lowing the price of CPU from B is 50%, the reservation price should be
= $35.00 - (50% of 20% of $35)
= $31.50
Anything below $31.50 from C is profitable for A.
Note: This is not a gmat question and if you are looking for solution for your school assignment, this not a right place and approach. This could severely damage your record if your school knows it.
Archived Topic
Hi there,
This topic has been closed and archived due to inactivity or violation of community quality standards. No more replies are possible here.
Where to now? Join ongoing discussions on thousands of quality questions in our Quantitative Questions Forum
Still interested in this question? Check out the "Best Topics" block above for a better discussion on this exact question, as well as several more related questions.
Thank you for understanding, and happy exploring!
