A monopolist sells a homogenous product in two markets, 1 and 2. These markets have demands Q1= 1 - p1 and Q2= a(1-p2), where a1. The monopolist has zero production costs.

(A) Assuming that the monopolist cannot discriminate between the two markets, calculate its profit maximising price, and the resulting profit as a function of a.

(B) Now suppose that the monopolist decides to use two part pricing (using a per unit price and a fixed charge) but, again, cannot discriminate between the two markets. Show that the profit maximising price and fixed charge, and the resulting profit are p=a-1/2a, f = (1+a)^2/8a^2 and = (1+a)^2/4a. Explain why this result differs from the situation where the monopolist uses different two part tariffs in each market.

(c) What happens to the result in (b) when a=1. explain