Both casual callers and enthusiasts like the iPhone, and they are distributed evenly amongst the population. So, let's say we have one of each: Casual Carol and Enthusiast Ed. Their values for different versions are given by the following:

Apple can NOT directly price discriminate since they don't know who is who (remember, Carol and Ed are standing in for whole segments of the population).

Finally, assume that MC = $300 for the Mini and MC = $400 for the Pro.

(a) (3 pts) What's the best Apple can do if it sells one version at one price, ie no price discrimination at all? NB: Because of the marginal costs, you'll need to evaluate each option carefully.

(b) (3 pts) What are the best prices (for Apple) that it can offer for each version if it decides to offer BOTH versions and wants different groups to buy different versions? Fully explain your answers and remember that you can NOT directly price discriminate.

(c) (2 pts) Can Apple create two separate versions such that the customers PROFITABLY self-sort? Explain your answer.