Description
A freshman at university, who has only taken in introductory class in mincroeconomics walks into a shopping mall and is surprised to see an Amazon store with products for sale.
1 They think to themselves, why would Amazon, a firm known for its online shopping presence and two-day shipping, have a store in a traditional retail mall.
This freshmans question is a good one and certainly one that might stump and/or flumex a student with only the elementary fundamentals of microeconomics. For you though, someone who is now steeped in the fundamentals of analyzing firm and individual behavior, such a question can be handled in a straightforward manner.
You tell the freshman that you will have an answer to them if they give you two hours to tackle the problem. You caution them that while your answer will not be perfect2 , it will try to lay out/describe the economic motivation for Amazons behavior. Specifically, it will write down Amazons objective problem, consider the dynamics/players in the markets and also incorporate uncertainty.
Task: In a Colab Notebook, pleas provide such an answer.