Question
Suppose that I open a coffee shop and sell cups of coffee to your cohort before the start of class. Your cohort is composed of
Suppose that I open a coffee shop and sell cups of coffee to your cohort before the start of class. Your cohort is composed of two types of students: Coffee Snobs and Regular People. Half of the class is each type, but I have no way of knowing who is who.
I have two types of coffee for sale: Nice Coffee, and Super Coffee. Regular people are willing to pay $2 for a Nice coffee and $2.80 for a Super coffee. Snobs are willing to pay $2.50 for Nice coffee and $5.00 for Super coffee. Every student will buy at most 1 cup of coffee.
The marginal cost of a Nice coffee is $1, and the marginal cost of Super coffee is $1.4. You have to choose one price for Nice, and one price for Super, and anyone can buy at those prices.
To maximize profits, what prices should I charge for Super coffee?
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