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Industrial Organization Return to the final example of section 5.5, in which the demand for AIDS drugs was QN = 100P inNorthAmericaandQS = 100 P
Industrial Organization Return to the final example of section 5.5, in which the demand for AIDS drugs was QN = 100P inNorthAmericaandQS = 100 P in Sub-Saharan Africa. Show that with marginal cost = 20 for such drugs, it must be the case that > 0.531 if the drug manufacturer is to serve both markets while charging the same price in each market. (HINT: Calculate the total profit if it serves only North America and then calculate the total profit if it serves both markets. Then determine the value of for which the profit from serving both markets is at least as large.)
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