Paperbacks to get highest profit with price discrimination

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Reference no: EM13967181

a. You are trying to discriminate between customers who are highpayers and lowpayers for books that you are selling. High payers are willing to pay $20 for a hardback and $12 for a paperback. Low payers are willing to pay $13 for a hardback and $10 for a paperback. A hardback costs you $12 to produce and a paperback costs you $8 to produce. There are 20 high payers and 80 low payers in the market (100 total). What will be the highest profit you can make if you only sell paperback books?

b. What will be the highest profit you can make if you only sell hardbacks?

c. What prices should you pick for the hardback and paperbacks to get the highest profit with price discrimination? Assume that, if two books provide the same surplus, a customer will choose the more expensive book.

Reference no: EM13967181

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