Question
A monopolist sells output to two kinds of customers. Type 1 customers have annual demand ofQ1 = 60p and type 2 customers have annual demand
A monopolist sells output to two kinds of customers. Type 1 customers have annual demand ofQ1 = 60p and type 2 customers have annual demand ofQ2 = 80p. There are equalnumbers of eachtype. Assume there areno fixed costs and themarginal cost of 1 is equal to $20 (or C(q) = 20q).
(a) If the monopolist can separate the two types of customers by visual inspection andpricediscriminate,whatis themonopolists optimalpricingpolicy?
(b) What if the monopolist cannot discriminate, what price would the monopolist charge to maximize profits?
(c) Now suppose the monopolist cannot separate customers by type, and price discriminate. Instead of charging a uniform price, the firm can impose a two-part tariff on its customers if it chooses. In other words, the firm charges a fixed fee of $T dollars per customer and a price of $p per unit of q. What is the monopolist's optimal pricing policy (give numerical values for T and p)?
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