Question
Two-Part Pricing: You're an executive at a company that rents out server space on computers. Your firm has 2 types of customers: business and academic.
Two-Part Pricing: You're an executive at a company that rents out server space on computers. Your firm has 2 types of customers: business and academic.
A typical business customer has the demand function Q=10-P (Q = days of computing power used per month). The typical academic customer has demand Q=8-P. The marginal cost of additional computing is $2 per day. Assume Fixed costs are 0. You use 2 part tariff with monthly fee (F) and usage price per second (P).
What subscription fee and usage price would you charge for business vs academic customers? Would would be your profits from a typical business customer?
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