Question
Suppose you own some nice apartments that you've recently decided to rent out on Airbnb. You believe that the demand for your apartments is different
Suppose you own some nice apartments that you've recently decided to rent out on Airbnb. You believe that the demand for your apartments is different for college students than non-college students:
Group 1 (non-college students): Q_1^D=400-P_1
Group 2 (college students): Q_2^D=600-2P_2
here Q_i^DQiD is the quantity demand for Group ii When it faces price P_iPi. This implies that the marginal revenue for each group is:
MR_1=400-2Q_1^D
MR_2=300-Q_2^D
Finally, suppose the marginal cost differs for each group (because college students tend to be more messy and like to party). Specifically, you estimate that the marginal cost for non-college students is $60 (MC_1=$60) and the marginal cost for college students is $80 (MC_2=\$80)
1)If you price discriminate, the profit maximizing price for non-college students (Group 1) is $? and the profit maximizing price for college students (Group 2) is $?
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