Question
1) A cellular service provider offers two types of data plans: 5GB & 10GB. There are two types of customers in the market: light
1) A cellular service provider offers two types of data plans: 5GB & 10GB. There are two types of customers in the market: light usage and heavy usage. The cost of both data plans, the each customer type's value of each plan, and the potential profit are summarized in the table below. WTP Potential Profit 5 GB 10 GB Cost 10 Light User Heavy User Light Heavy 15 20 5 10 20 20 35 15 a) Assume there are 200 heavy users and 100 light users. If the cellular service provider knew each customer's type, what pricing scheme would they devise to maximize their profit? What are their profits under this scheme? b) If the cellular service provider does not know each customer's type, what will be the result of the pricing scheme you devised in part (a). c) What are the participation and the incentive-compatibility constraints for both users? d) What is the profit maximizing pricing scheme that satisfies both customer types participation constraints and incentive-compatibility constraints? e) What are the profits under this pricing scheme? f) What are the profits from just serving heavy users? I
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started