Will the low type want to buy the high types package

Assignment Help Business Economics

Reference no: EM131083606

Suppose we have two types of consumers (for simplicity we’ll assume that there is one person of each type). They have inverse demand curves given by: p1 =110−2q1 andp2 =70−4q2. Initially, we will assume that the monopolist can tell them apart and that consumers cannot change or fake their type. Let the marginal cost of production be equal to 10. Label group 1 as the “high type” and group 2 as the “low type.”

(a) Derive the optimal two-part tariffs (F1, p1; F2, p2) for the two groups.

(b) What is the corresponding optimal block pricing scheme?

(c) Now suppose that the monopolist cannot tell the two consumer groups apart. Define and explain what the term incentive compatible means in this context.

(d) How much surplus does the high type get from buying the low type’s package? Derive a general expression, A(q2), for this surplus in terms of q2.

(e) Will the low type want to buy the high type’s package?

Reference no: EM131083606

Questions Cloud

Human resources management-phr class : Human Resources Management - PHR Class: Share one new insight that you have had about organizational effectiveness & development and workforce management from reading the material and/or your professional experience.

Using legitimate news and political sources : Research the government shutdown using legitimate news and political sources. Describe the effect the government shutdown had on federal services and federal spending. Do you believe there were lasting effects from the government shutdown (if so - de..

Texas government-projection may cause bandwagon effect : Why might some argue that news stations ought to stick to reporting what is actually happening on Election Day rather than making projections? Projection may cause a bandwagon effect. Projections based on push-polls may be inaccurate.

Find the ligand-to-metal ratio in the product : Find the ligand-to-metal ratio in the product.

Will the low type want to buy the high types package : Suppose we have two types of consumers (for simplicity we’ll assume that there is one person of each type). They have inverse demand curves given by: p1 =110−2q1 andp2 =70−4q2. Initially, we will assume that the monopolist can tell them apart and tha..

Random variable that is independent of any collection : Let A be a nonnegative random variable that is independent of any collection of samples X(t1), . . . , X(tk) of a stationary random process X(t). Is Y(t) = AX(t) a stationary random process?

Knowledge of an organization : Drawing on your own experiences with or knowledge of an organization with which you are familiar-and relating that to the discussion -describe the HRM practices of that organization, and explain which of these practices are ‘strategic' or what nee..

What is the steady-state unemployment rate : Consider an economy where there are 100 unemployed persons and 900 employed persons. The job finding rate (f) of the economy is 0.3 and job separation rate of the economy (s) is 0.02. What is the average spell of employment? What is the average spell..

Write article review-could depression be a allergic reaction : Prepare an article review in apa format for the following article: Could Depression Be an Allergic Reaction? By Therese J. Borchard

User Account

All Pages