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(2) Suppose that there are two consumers. The first consumer has a demand function 91 = 10 - p and the second consumer has a
(2) Suppose that there are two consumers. The first consumer has a demand function 91 = 10 - p and the second consumer has a demand function 92 = 10 Suppose that the monopolist has a constant marginal cost c and cannot distinguish the consumers. The monopolist would like to design the optimal two-part tariff scheme (p, E), where p is the per unit price and E is the "entry fee". The monopolist needs to consider two alternatives. In alternative 1, the monopolist excludes consumer 1: (p, E) is such that consumer 1 finds it too exensive to pay the entry fee. In alternative 2, the monopolist sets (p, E) such that both consumers participate. (a) Assume c = 3. What is the optimal two part tariff the monopolist can offer? How much does each consumer purchase? What is the monopolist's profit? (b) Now assume that c = 8. What is the optimal two part tariff the monopolist can offer? How much does each consumer purchase? What is the monopolist's profit
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