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39. In class we've discussed the fact that the baseline models we've constructed can be extended to incorporate more advanced techniques. Let's look at a

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39. In class we've discussed the fact that the baseline models we've constructed can be extended to incorporate more advanced techniques. Let's look at a specic extension that incorporates the mncept of price discrimination. In particular, assume that a rm with constant marginal costs of $2 has two types of customers. The rst type has a market demand of 101(1)) = 20 -- p . The second type is more price-sensitive and has a market demand of .1")2 (p) = 18 p . :1. Assume the rm can only set a single price. For instance, when an individual shows up to purchase a good the rm cannot determine which type of consumer she is. 1What is the maximal prot the rm can achieve? Hint: This is pretty much a standard market power model where you need to solve for the market demand, protvmaximize, then determine if the firm would sell to each customer type. 13. Now assume the rm can set a different price in each market. For instance, the rm can offer senior citizen discounts. If the rm protmaximizes in market 1 and also protwmaximizes in market 2, what prices will it set in each market? c. How much extra prot will the rm receive by price-discriminating in this manner

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