Price discrimination and bundling, economics, Microeconomics

Assignment Help:
We consider two regions A and B. Each market has the same size (i.e. number
of consumers) but differs in the willingness to pay for one unit of the good proposed
by the firm. On market i a consumer has a unit-demand for the good and her willingness
to pay is equal to Bi with i = A,B and with BA > BB. The firm incurs no cost.

1. The monopoly has perfect and verifiable information on consumer characteristics
(location and willingness to pay) and thus is able to price discriminate. Find the
optimal prices set by the monopoly in both regions. Is this pricing policy robust to
arbitrage if there is no transport cost between both regions?

2. What is the optimal price without price discrimination?
Assume now that BA < 2BB. Moreover, the firm may propose to consumers a
service in addition to the good. The valuation for that service is equal to s in both
regions. The transport cost of the service is infinite.

3. If the monopoly decides to price discriminate, determine the price for each
product in both regions. Is that pricing policy robust to arbitrage?
The monopoly introduces tie-in sales so that each consumer is now constrained to
buy the bundle "good plus service".

4. Determine the price of each bundle if the monopoly price discriminate. Show
that the discriminatory pricing policy is robust to arbitrage if and only if s < BA-BB.
Explain this result.

Related Discussions:- Price discrimination and bundling, economics

Production, who is a rational producer?

who is a rational producer?

Factors affecting demand forecasting - credit conditions, The availability ...

The availability of credit and hire purchase facility tends to push up the demand for consumer durables. In India for consumer durables lie Refrigerators television scooters etc, h

Calculate long-run optimal amounts of workers and ma, Dolph, Jimbo, and Kea...

Dolph, Jimbo, and Kearney are the only individuals participating in the very particular labor market for ‘protective’ services. Dolph''s labor supply is given by ????????=-46+0.874

Production, explain 6 factors that determine volume of production

explain 6 factors that determine volume of production

Visit to village panchayat for agricultural based project., related documen...

related documents, photos,paper for permission from court etc.

Supply, plese give me supply assigement

plese give me supply assigement

Rationale for government intervention, Rationale for government interventio...

Rationale for government intervention There are six major functions the government can perform in an economy. 1. The government provides a legal and social framework within which

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd