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Calculate the profit maximizing bundles

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Question: A monopolist has 3 different types of customers, types H, M and L with demands given by qH = 18pq M = 14 p qL = 10p. Assume that there are 2 persons of type L, and one person of type M and type H each.

The marginal cost of production is $2 and is equal to the average cost of production.

(a) What is the profit maximizing quantity-tariff bundle if only one is offered for all consumers?

(b) What is the profit maximizing two-part tariff (non-linear pricing) if one two-part tariff is offered to all customers?

(c) What two-part tariffs (non-linear pricing) will the firm offer if it can exercise third degree price discrimination?

(d) Suppose the monopolist wants to create two quantity-tariff bundles, (qA, tA) and (qB, tB) where the A bundle is targeted to both type H and M consumers, while the B bundle is targeted towards L-type customers. Calculate the profit maximizing bundles (qA*, tA*) and (qB*, tB*) when types are unverifiable (incentive compatible bundles)

(e) What are the three profit maximizing bundles if it offers a different one for each type?

Reference no: EM132206545

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