How does the optimal two-part tariff change

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1. Suppose a gym faces inverse demand p(qi) = a-bqfrom each of identical customers, and costs represented by C(Q) = cQ. Without competition, this would imply that , and.

The is one contract the gym offers.

1. There is another contract available, though, where the client agrees to give the gym a sum of money, F, out of which the gym would then pay clients dollars for each workout. What does this second option look like? (That is, what are the optimal and f?)

2. How does the optimal two-part tariff change when $per-unit tax is introduced? (Assume that inverse demand is p(q) = a-bq, and costs are represented by C(q) = cq.)

Reference no: EM131521334

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