23 Jul DETERMINE THE PROFIT-MAXIMIZING SINGLE PACKAGE TO OFFER.
4) to just two consumer types which Show more (Modified) A monopolist with constant marginal cost of 4 (MC 4) to just two consumer types which are of equal size n. Members of group 1 have individual inverse demand curve given by p1(q) = 16 (1/2)q while members of group 2 have individual inverse demand given by p2(q) = 20 (1/2)q. (Because marginal cost is constant you may assume each group has just one member.) Resale of the good among consumers is impossible. (1) Suppose the monopolist offers just a single two-part tariff. Calculate the one that maximizes its profit. Calculate the associated profit. (2) Suppose the monopolist can not tell whether a person is in group 1 or group 2. So it offers a pair of two-part tariffs and lets each consumer buy according to the one he or she prefers. Calculate the profit-maximizing pair of two-part tariffs for the monopolist to offer. Calculate the associated profit. (3) Suppose the monopolist offers just a single package for sale described as (q0 T E0). Accordingly a consumer has the choice of buying nothing or buying exactly q0 units for a total expediture (payment from that consumer) of T E0. Determine the profit-maximizing single package to offer. How does this profit compare with that in the two previous parts? (4) Suppose the monopolist offers two packages for sale described as (q1 T E1) and (q2 T E2). Accordingly a consumer has the choice of buying nothing or buying exactly q1 units for a total expediture of T E1 or buying exactly q2 units for a total expediture of T E2. (The monopolist envisions that those in group 1 will choose (q1 T E1) and those in group 2 will choose (q2 T E2).) Determine the profit-maximizing pair of packages to offer. Calculate the associated profit. Show less
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