Product Differentiation In Tennis Racquets & Economic Analysis & Profit - Economics Assignment Help

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Product Differentiation in Tennis Racquets

Tennis players know all about the feel of hitting the sweet spot in the strings. Now they can back up that feeling with facts. The first tennis racquet with an on/off switch is also the first racquet to track stroke data, including where the ball hits the string bed. 

The Babolat Play Pure Drive Set will launch on Dec. 12. Babolat, a French racquet manufacturer founded in 1875, revealed the racquet to PopMech early, showing off the culmination of a 10-year project.

CEO Eric Babolat envisioned the connected racquet a decade ago, but it took time for sensor technology to shrink down and lighten up enough so that he wouldn’t have to strap a backpack and wires to players.…

Babolat teamed with French firm Movea, the company behind the Nintendo Wii remote, to build the digital guts. Inside the otherwise-hollow grip, they placed an accelerometer and gyroscope along with a 6-hour battery, USB port, Bluetooth connectivity, and enough memory to hold 150 hours of play data. …

The Babolat Play detects stroke type—forehand, backhand, smash, and first and second serves—measures spin and power, tracks rally length and playtime, and maps out the location the ball strikes the string bed. The racquet saves all that data, which is available for download to an app via either Bluetooth to Android or Apple mobile devices or USB to a computer. In two test sessions, the app distilled the information accurately.…

The app saves training and match sessions, shares information in a community setting, and compares

data head-to-head with friends or top players—so you can see how well you stack up against a champion like [Rafael] Nadal. …

“The oldest company in tennis is making tennis cool,” Eric Babolat says. All with an on/off switch.

Economic Analysis

The market for tennis racquets is an example of monopolistic competition. Nineteen firms compete in a market with up to 1,000 differentiated racquets. Although the racquets are differentiated, most of them are close substitutes for each other. Close substitutes have highly elastic demand, so markups are low and economic profit is competed away. To make an economic profit, a firm must keep innovating. The market for tennis racquets has seen a sequence of innovations: metal frame (Wilson, 1967), oversize frame (Prince, 1976), and graphite frame (Prince, 1980). Today’s innovation is Babolat’s Play Pure Drive electronic racquet described in the news article. By creating a substantially differentiated product, Babolat was able to bring to the market a product more clearly differentiated from its competitors. The monopolistic competition model explains what is now happening at Babolat and what the future holds.

Questions:

1. Give the short-run analysis for Babolat tennis racquet from Figure 1.

2. Give the long-run analysis for Babolat tennis racquet from Figure 2 

3. Why did the long-run profit for Babolat become zero?

4. How can Babolat increase its profit further? 

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