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What is the optimal pair of two-part tariffs

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Reference no: EM132006611

Suppose the monopoly has a constant marginal cost of 0 and can sell its good to two different groups of customers. One group of "poor" has demand function P = 1.5 - Q; the other - equally large group of "rich" has demand: P = 2 - Q. The seller cannot tell whether a particular consumer is rich or poor, but she knows that there is equal number of both types.

a. What is the optimal pair of two-part tariffs: the pairs Fr - the entry fee and pr - the price per unit that monopoly intends for the rich guy and Fp - the entry fee and pp - the price per unit that monopoly intends for the poor guy?

Reference no: EM132006611

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