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Exercise 3: 2-Part Tariff Consider a monopolist who uses a two-part tariff to third-degree price discriminate. The monopolist serves two types of consumers. There are
Exercise 3: 2-Part Tariff Consider a monopolist who uses a two-part tariff to third-degree price discriminate. The monopolist serves two types of consumers. There are 100 consumers of type A and 10 consumers of type B. Aggregate demand from the 100 type-A consumers is 40-p if p 0. Suppose the monopolist is able to (second-degree) price discriminate between the two types of consumers by using a two-part tariff. That is, the monopolist will set a ride fare p" and different admission fees FA and FB.1. Suppose the monopolist's marginal cost for admissions is zero, Le MC:(Q) = 0 for all Q > 0. Find the optimal quantity of rides sold q', rides fare p", and admission fees F; and F;. Will the monopolist serve both types of consumers and how many rides will each type of consumer buy? 2. Suppose the monopolist has a marginal cost of $5 per admission, Le. MCp(Q) = 5 for all Q > 0. Find the optimal quantity of rides sold q", rides fare p", and admission fees Fi and F;. Will the monopolist serve both types of consumers and how many rides will each type of consumer buy? (Here the quantity of rides can be non-integers.)
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