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A monopolistic internet service provider is striving to determine features and pricing for its service. After extensive research, it has determined that its customers fall
A monopolistic internet service provider is striving to determine features and pricing for its service. After extensive research, it has determined that its customers fall into two categories: Gamers and Streamers. Gamers are willing to pay more for their internet service than are Streamers. Gamers are fanatical about connection speed and are willing to pay for it; Streamers also prefer faster connections, but their preferences are not as strong. The willingness to pay for a month's service with connections of different speeds for a typical Streamer and a typical Gamer is shown in the table below: T e 100Mb s SOMb s 30Mb s Gamer $60 $45 $30 Streamer $30 $25 $20 The provider can offer any speed up to 100Mbps at a marginal cost of zero. You have reliably estimated that there are 2 million Gamers and 3 million Streamers in the service area. a. (5 points) Currently, the provider offers two tiers of service: 50M bps for $25 per month, or 100Mbps for $45 per month. Can you improve on the provider's pricing strategy, given these two tiers of service offerings? b. (9 points) Given these consumer preferences, what combination of tiers offered and prices earns the provider the most revenue? Explain. c. (6 points) Suppose the provider's estimates of 2 million Gamers and 3 million Streamers are incorrect there are actually 1 million Gamers and 4 million Streamers. How would you revise the provider's pricing strategy in this case
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