Gamaleya Institute in Moscow claims to be first pharmaceutical company to have created a vaccine for Covid-19. Accordingly, the firm plans to sell its vaccine in two different markets: domestic and foreign. The corresponding demand functions are

P1 + 2Q1 = 100 (1) 2P2 + Q2 = 2a (2)

where

Equation 1 is the domestic market Equation 2 is the foreign market

Q = Q1 + Q2

a is a positive constant.

(a) Determine, in terms of a, the prices needed to maximise profit with price discrimination

without price discrimination.

(b) Show that the profit with price discrimination is always greater than the profit without discrimi- nation, irrespective of the value of a.