What is the profit-maximizing tie-in sale price of product a

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Reference no: EM13157338

Assume that there are two complementary products, A and B, where the quantity of B is variable relative to a single unit of A. There are two types of consumers, High and Low-demand. Their inverse demand curves and the constant marginal costs are as follows:

Ph= 20-qh

Pl=16-2ql (I assume H= high and l = low)

MCb=2

(a) If the firm has a monopoly in product A and product B is sold in a competitive market, then what is the profit-maximizing tie-in sale price of product A?

(b) If the firm has a monopoly in both products, then what is the profit-maximizing tie-in sale price of product A?

(c) If the firm figures out a way to â€˜technologically tieâ€^TM products A and B (such that each product A comes with a fixed quantity of B), then what are the profit-maximizing (block) prices for each consumer-specific tied product?

Reference no: EM13157338

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