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A manufacturer of flash drives has a profit function :1: = t 647' where t is the price charged for a flash drive and 42
A manufacturer of flash drives has a profit function :1: = t 647' where t is the price charged for a flash drive and 42 is the cost of producing a drive whose capacity is q gigabytes. A consumer of type 6 has a utility function u = 6g i, where 6 takes on a value of 13 for H-type consumers, or 9 for L-type consumers. There are 10 consumers of each type. A consumer gets zero utility if she does not buy. Answer the following. if rounding is needed, round to 3 decimal points. a) (0.25 point) Suppose (Q'L, 2L) is the optimal (profit maximising) capacity-price bundle for L-type consumer under complete information. What is the value of 3L? l: b) (0.25 point) Suppose (4711.511) is the optimal (profit maximising) capacity-price bundle for H-type consumer under complete information. What is the value of g? U c) (0.5 points) What is the seller's overall profit under complete information? [: For part d) - i), assume information is asymmetric. d) (0.5 point) Suppose that the seller continues to offer the capacity- price bundles that maximises his profit under complete information: that is, he offers (L, ) and (53,131,). What is the utility for the type 01. consumer from buying the (fig, EH) bundle? That is, what is 11.01? tH)? [: e) (0.5 point) What is the utility for the type 9,; consumer from buying the ((11, EAL) bundle? That is, what is u\" (db :1)? U f) (1 point) What are the seller's profits if he offers the bundles (L, h) and (if), 3H) when information is asymmetric? U Now suppose the seller decides to offer a menu of capacity-price bundles (qL, IL) and (4.13, lg) to incentives the two types of consumers to sort themselves out. Answer part 9) to i) in this context. 9) (0.5 point) For Htype consumer, what is the optimal (profit maximising) level of cm ? l: h) (1 point) Suppose (git?) is the optimal (profit maximising) capacityprice bundle for Ltype consumer under asymmetric information. What is the value of ti ? :l i) (0.5 points) What is the seller's overall profit under asymmetric information if the seller offers a menu of profit maximizing capacity-price bundles (qL, IL) and ((1);, EH) to consumers? l:]
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