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A manufacturer of flash drives has a profit function , = 1 - 6q- where i is the price charged for a flash drive and

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A manufacturer of flash drives has a profit function , = 1 - 6q- where i is the price charged for a flash drive and q is the cost of producing a drive whose capacity is q gigabytes. A consumer of type 0 has a utility function u = 0q - 1, where 0 takes on a value of 12 for H-type consumers, or 8 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 1, (1) is the optimal (profit maximising) capacity-price bundle for L-type consumer under complete information. What is the value of f _? b) (0.25 point) Suppose (q H, ( H ) is the optimal (profit maximising) capacity-price bundle for H-type consumer under complete information. What is the value of f H ? 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 (q 1, 1 1) and (9 H, 1H ). What is the utility for the type 0 consumer from buying the (9 H, ( H ) bundle? That is, what is ul (q H, (H)? e) (0.5 point) What is the utility for the type : consumer from buying the (q ,, (1 ) bundle? That is, what is UH(qL, IL)? e) (0.5 point) What is the utility for the type 0# consumer from buying the (q 1, (1) bundle? That is, what is UH(qL, IL)? f) (1 point) What are the seller's profits if he offers the bundles (q 1, 1 1) and (q H, 1 H ) when information is asymmetric? Now suppose the seller decides to offer a menu of capacity-price bundles (q1, (1 ) and (qH, (H ) to incentives the two types of consumers to sort themselves out. Answer part g) to i) in this context. g) (0.5 point) For H-type consumer, what is the optimal (profit maximising) level of q H? h) (1 point) Suppose (q1, 1; ) is the optimal (profit maximising) capacity-price bundle for L-type consumer under asymmetric information. What is the value of t; ? 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 (q1, (1 ) and (qH, [H ) to consumers

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