What is the optimal price without price discrimination, Cost Accounting

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 σ 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 σ < BA-BB. Explain this result.


Related Discussions:- What is the optimal price without price discrimination

Account, contract account formate

contract account formate

Calculate the rate of learning of initial production phase, Calculate the r...

Calculate the rate of learning at which the initial production phase profit target would be achieved, assuming no other cost savings can be made.   Assuming no other cost savi

Objective type question, 1. The bank added another company's deposit to our...

1. The bank added another company's deposit to our account. This would be included on the bank reconciliation as a(n). a) addition to the balance per books. b) subtraction from the

Determine the current share price - shareholder, Most corporations pay quar...

Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or mainta

Realized gain or loss on the exchange, Pauline's Pastry Shop decides to rem...

Pauline's Pastry Shop decides to remodel its offices this year. As part of the remodeling, Pauline's trades furniture with a cost of $12,000 that had been expensed in the year of p

Business process mapping, Using some variation of business process mapping,...

Using some variation of business process mapping, graph out the mango concentrate supply chain focusing on when cost is added to the supply chain. (i.e. Display/draw the process

Usefulness of variance analysis, Usefulness of Variance Analysis Caref...

Usefulness of Variance Analysis Carefully note that while prices are being charged to production, it can be done at the actual or standard price. For purposes of making varian

Process costing, Process Costing It is a costing method, which is appl...

Process Costing It is a costing method, which is applied wherever there are standard operations along with continuous production of homogeneous as identical units. Consequentl

Difference between cost accounting and financial accounting, The difference...

The difference among "cost accounting" and "financial accounting are terms demote to the accounting techniques used internally by a company's management to explain the costs of run

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