Question
T-shirts designed by a famous Italian designer, named Marco, are exclusively sold in only one store in Milan and in one store in Paris. Both
T-shirts designed by a famous Italian designer, named "Marco", are exclusively sold in only one store in Milan and in one store in Paris. Both of these stores belong to Marco. Marco comes from Italy and his t-shirts are more successful in Italy than in France. In particular:
- In Milan he has 100 customers, each having the following demand: pM = 40 2q.
- In Paris he has 100 customers, each having the following demand: pP = 20 2q.
The marginal cost that he faces in both cities is 2. Assume throughout the exercise that consumers
cannot travel between the two cities.
Marco has to decide on the price that it will appear on the price tag that he puts on his t-shirts. The same price tag will be put in his t-shirts that are available in both of his stores.
What price will he choose?
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