3. Durable goods monopoly low and high valuation groups Suppose a monopolist faces two groups of consumers willingness to pay are described below. The monopolist can sell the durable product over two periods. Assume the discounting factor & = 0.9 (i.e., a dollar in the second period is only worth ninety cents in the first period). whose Low valuation consumer High valuation consumer Willingness to pay 25 30 3.1. If the monopolist sets the same price across two periods, what is the optimal price and profit? 3.2. Suppose the monopolist sets different prices across two periods in order to sell to the high valuation consumer in the first period and to the low valuation consumer in the second period. What are the optimal prices and profit?
3. Durable goods monopoly low and high valuation groups Suppose a monopolist faces two groups of consumers willingness to pay are described below. The monopolist can sell the durable product over two periods. Assume the discounting factor & = 0.9 (i.e., a dollar in the second period is only worth ninety cents in the first period). whose Low valuation consumer High valuation consumer Willingness to pay 25 30 3.1. If the monopolist sets the same price across two periods, what is the optimal price and profit? 3.2. Suppose the monopolist sets different prices across two periods in order to sell to the high valuation consumer in the first period and to the low valuation consumer in the second period. What are the optimal prices and profit?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![3. Durable goods monopoly
low and high valuation groups - whose
Suppose a monopolist faces two groups of consumers
willingness to pay are described below. The monopolist can sell the durable product over two
periods. Assume the discounting factor 8 = 0.9 (i.e., a dollar in the second period is only worth
ninety cents in the first period).
Low valuation consumer High valuation consumer
Willingness to pay
25
30
3.1. If the monopolist sets the same price across two periods, what is the optimal price and profit?
3.2. Suppose the monopolist sets different prices across two periods in order to sell to the high
valuation consumer in the first period and to the low valuation consumer in the second period.
What are the optimal prices and profit?
3.3. Which strategy
3.1. or 3.2.
yields more profit for the monopolist? Why?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdf4ade9e-1811-4146-8de1-929f9527bfe5%2Fff89217e-88c8-4bd3-9dad-e117f5770f7f%2F4cswyfx_processed.png&w=3840&q=75)
Transcribed Image Text:3. Durable goods monopoly
low and high valuation groups - whose
Suppose a monopolist faces two groups of consumers
willingness to pay are described below. The monopolist can sell the durable product over two
periods. Assume the discounting factor 8 = 0.9 (i.e., a dollar in the second period is only worth
ninety cents in the first period).
Low valuation consumer High valuation consumer
Willingness to pay
25
30
3.1. If the monopolist sets the same price across two periods, what is the optimal price and profit?
3.2. Suppose the monopolist sets different prices across two periods in order to sell to the high
valuation consumer in the first period and to the low valuation consumer in the second period.
What are the optimal prices and profit?
3.3. Which strategy
3.1. or 3.2.
yields more profit for the monopolist? Why?
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