Durable Goods Monopoly: Leasing versus Selling. Suppose that there are two equally sized cohorts of consumers. Normalize the size of each group to 1. The value of services per period provided by a durable to high types is 30 , the value to the low types is 10 . There are two periods, with both cohorts in the market in both periods. The marginal cost of supply of the durable is zero and the common discount factor is =1. (a) What is first period demand for each group if the durable goods monopolist can commit to prices? What is its profit maximizing price in period 1 and period 2 ? Its profits? (b) What is the optimal lease fee the durable goods monopolist should charge each period? Its profits? (c) What is its optimal prices if consumers are naive and it engages in price discrimination? Its profits? (d) Show that the high types would find it optimal not to buy in the first period for the prices in (c), but would substitute to the second period. (e) What are the optimal prices for a monopolist who sells but cannot commit to prices? Its profits? (f) Why are its profits less, and by how much, if it cannot commit to its prices? Durable Goods Monopoly: Leasing versus Selling. Suppose that there are two equally sized cohorts of consumers. Normalize the size of each group to 1. The value of services per period provided by a durable to high types is 30 , the value to the low types is 10 . There are two periods, with both cohorts in the market in both periods. The marginal cost of supply of the durable is zero and the common discount factor is =1. (a) What is first period demand for each group if the durable goods monopolist can commit to prices? What is its profit maximizing price in period 1 and period 2 ? Its profits? (b) What is the optimal lease fee the durable goods monopolist should charge each period? Its profits? (c) What is its optimal prices if consumers are naive and it engages in price discrimination? Its profits? (d) Show that the high types would find it optimal not to buy in the first period for the prices in (c), but would substitute to the second period. (e) What are the optimal prices for a monopolist who sells but cannot commit to prices? Its profits? (f) Why are its profits less, and by how much, if it cannot commit to its prices