You work as an external consultant for a company based in Leicester. The firm is the only one operating in the market, therefore, it has no competition and has market power. Your company's name is Avanza (A for short). A is planning to introduce a new product X which currently has 3 versions labelled X1, X2, and X3 respectively. The difference between the 3 versions is the speed at which the product can perform a task, with version 1 being slower than version 2, and version 3 being faster than version 2. The owners of the company are deciding which version to select to sell in the market. They shared the following information with you:

1. The market is formed by consumers uniformly distributed in 4 income brackets: b1, b2, b3, and b4, with b1 being the lowest income bracket, b2 the second lowest, then b3, and finally b4 with the highest income.
2. Most consumers in b1 and b2 live and work in area A, while consumers in b3 live in area B, and those in b4 live in C. The costs of travelling from one area to the other deter consumers from travelling from one to the other.
3. The cost of producing the different models are denoted by c(xi),I=1,2,3, with c(x1)<c(x2)=c(x3).
4. A couple of years ago, there were two companies, F1 and F2, offering a similar product, one cheaper than the other but also with an older technology. There is evidence from surveys that indicates consumers would like to see the product being offered again, and they are even willing to pay more than they used to pay. They know that the price of the product formerly offered in the market were p1 for the product offered by F1, and p2 for F2's product. You also know that inflation has been close to zero in the last couple of years.
5. They also tell you that the cost of production ofversion X1 is smaller than the price of the product formerly offered by F1, that is, C(x1)<p1. Also, the price of the product F2 used to offer is higher than the cost of production of version X3, c(X3)<p2.

You are being asked to provide a strategy for the firm's introduction of X on the market. In particular to inform the owners about which version or versions to sell and what price or prices to charge.

1. Use the economic intuition, theoretical concepts and results related to price discrimination learnt and developed over the year to inform A about the best strategy regarding which product version or versions they should sell in the market. (25 marks)