Question
ou are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange
ou are an executive for Super Computer, Inc. (SC), which rents out super computers. SC receives a fixed rental payment per time period in exchange for the right to unlimited computing at a rate of P cents per second. SC has two types of potential customers of equal number, 10 businesses (B) and 10 academic institutions (A). Each business customer has the demand function Q = 10 - P, where Q is in 10 000 of seconds per month; each academic institution has the demand Q = 8 - P. The marginal cost to SC of additional computing is 2 cents per second, regardless of the volume. There are no fixed cost, But instead of an equal number of potential customers in each group, there are 100 potential business institutions and 10 academic institutions. Which price strategy would you recommend as executive for Super Computer to maximize profits and price discrimination is not possible: one-part or two-part tariff? Calculate the profit of your proposed price strategy
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