Question
Hookups.com is an internet dating site that helps people meet partners by showing them profiles of potential matches. When a person signs up, she fills
Hookups.com is an internet dating site that helps people meet partners by showing them profiles of potential matches. When a person signs up, she fills out a profile, then pays money to view profile of others. The company can control the volume of profiles sent to each customer. The company has hundreds of profiles in the computer system and it costs nothing to email profiles to customers (MC=0). Suppose there are two types of known customers: desperate customers have inverse demand for profiles given by pd= 40 - 2qd, and casual customers have inverse demand pc= 20 - 2qc. The company has exactly one type of customer in each group. If the profiles that customers fill out has enough information to allow it to perfectly price discriminate, what will the company's profits be?
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