03 Jun Question Consider a platform market. There are two sides of the marke
Question
Consider a platform market. There are two sides of the market, with demand functions
q1(p1) = 300 ? p1
q2(p2) = 180 ? .5p2.
A monopoly firm serves this market and chooses p1 and p2. Assume that every person on side one uses the
platform to interact with every person on side two. Each such interaction generates p1 + p2 in revenue for
the firm. Each interaction also incurs a cost of 30 to the firm.
(a) Write the firm’s profit function using the above assumptions.
(b) Write the first order conditions that characterize the equilibrium. (There will be two)
(c) Solve for equilibrium p1 and p2.
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