2. A monopolist sells a durable good that lasts for two periods without depreciating. The discount rate is . Unit costs are 1/4 . Consumer 1 would be willing to pay =1 in each period for consumption in that period. Consumer 2 is willing to pay only =1/2 for consumption in each period. The monopolist can only charge a single price to all buyers in each period.

a. Suppose that the monopolist can commit in the first period to a sequence of 2 prices {1,2}. What are they?

b. Suppose that the monopolist cannot commit to a sequence of 2 prices in the first period (so that the period 2 price will be whatever is optimal for the monopolist in period 2). What is the optimal (profit-maximizing) strategy for the monopolist (i.e. what price will be charged in each period?)