Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are selling a software product called Link which is available in high and low quality versions called Link Professional and Link Home respectively.

image text in transcribed 

You are selling a software product called "Link" which is available in high and low quality versions called Link Professional and Link Home respectively. You have 2 units of Link Professional and 2 units of Link Home. There are 2 potential customers, each of whom is interested in buying 1 unit of Link (either Link Professional or Home but not both). Suppose that your objective is to maximize the total revenue from selling the software. Further, you do not know the identity of either buyer and you must sell by posting one price for Link Professional and another price for Link Home. Each buyer seeks to maximize her consumer surplus and may buy Link Professional or Link Home or neither depending on the prices that you post. Please show all intermediate steps and clearly explain your reasoning. i. What is the optimal price and resulting revenue under the following scenario? What (if anything) would each customer buy? ii. If you could identify each buyer and make targeted offers, what price would you offer to each and how much revenue would you earn? What (if anything) would each customer buy Scenario The willingness to pay (WTP) of the 2 potential buyers is: Link Professional Link Home WTP of Buyer A 600 400 WTP of Buyer B 500 300

Step by Step Solution

3.40 Rating (150 Votes )

There are 3 Steps involved in it

Step: 1

Answer i Link Professional price will be kept as 500 and Link Home will be ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microeconomics An Intuitive Approach with Calculus

Authors: Thomas Nechyba

1st edition

538453257, 978-0538453257

More Books

Students also viewed these Economics questions