7. T-shirts designed by a famous Italian designer, named "Marco", are exclusively sold in only one store in Milan and in one store in Paris. Both of these stores belong to Marco. Marco comes from Italy and his t-shirts are more successful in Italy than in France. In particular: - In Milan he has 100 customers, each having the following demand: PM = 40 - 2q. - In Paris he has 100 customers, each having the following demand: pp = 20 - 2q. The marginal cost that he faces in both cities is 2. Assume throughout the exercise that consumers cannot travel between the two cities. (a) Marco has to decide on the price that it will appear on the price tag that he puts on his t- shirts. The same price tag will be put in his t-shirts that are available in both of his stores. What price will he choose? (b) Assume now that he can put different price tags on the t-shirts that are available in his two stores. Calculate the price that he will choose for the store in Milan and for the store in Paris. (c) Assume now that Marco has decided to sell his t-shirts only to customers that are members of his on-line community. Customers, both in Milan and in Paris, can go to his website and sign- up in order to become members. Whenever a customer signs up he/she has to pay a fixed membership fee A, which is the same both for consumers in Milan and in Paris. Once a customer becomes a member then he/she can visit Marco store, show his/her membership card and buy Marco' t-shirts at a price p per shirt. What is the value of A and p that Marco will charge if he wants to have customers both in Milan and in Paris? Which are his profits? (d) What is the value of A and p that Marco will charge if he decides to keep only the store in Milan? Does he have incentives to keep only the store in Milan given that if he keeps both stores he will have to set the same A and p in both of them