Consider a monopolist with marginal cost of production c=14. The monopolist faces two types of buyers, type 1 and type 2. The percentage of type 1 buyers is ẞ=0.5. Each of the type-1 consumers has a demand equal to q₁ (p1) = a - b1p1. Likewise, each of the type-2 consumers has a demand equal to: q2 (p2) = a - b2p2, where a=2, b₁ =0.05 and b₂ =0.07 Suppose the seller cannot identify the type of buyer that enters the shop and hence cannot price discriminate accordingly. Suppose he/she can use two-part tariffs. Suppose the seller uses a a couple of two-part tariffs, consisting in a fixed fee and a per-unit price, each two-part tariff intended for each type. Further suppose the seller prefers to serve the two types of consumers. We have studied in class that the per-unit price that the high-demand types will pay is equal to the marginal cost. At what per-unit price would the seller sell the product to the low-demand buyers? Report the unit price in the answer box with three decimals.
Consider a monopolist with marginal cost of production c=14. The monopolist faces two types of buyers, type 1 and type 2. The percentage of type 1 buyers is ẞ=0.5. Each of the type-1 consumers has a demand equal to q₁ (p1) = a - b1p1. Likewise, each of the type-2 consumers has a demand equal to: q2 (p2) = a - b2p2, where a=2, b₁ =0.05 and b₂ =0.07 Suppose the seller cannot identify the type of buyer that enters the shop and hence cannot price discriminate accordingly. Suppose he/she can use two-part tariffs. Suppose the seller uses a a couple of two-part tariffs, consisting in a fixed fee and a per-unit price, each two-part tariff intended for each type. Further suppose the seller prefers to serve the two types of consumers. We have studied in class that the per-unit price that the high-demand types will pay is equal to the marginal cost. At what per-unit price would the seller sell the product to the low-demand buyers? Report the unit price in the answer box with three decimals.
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.9P
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Transcribed Image Text:Consider a monopolist with marginal cost of production c=14. The monopolist faces two types of
buyers, type 1 and type 2. The percentage of type 1 buyers is ẞ=0.5. Each of the type-1 consumers
has a demand equal to q₁ (p1) = a - b1p1. Likewise, each of the type-2 consumers has a demand
equal to: q2 (p2) = a - b2p2, where a=2, b₁ =0.05 and b₂ =0.07
Suppose the seller cannot identify the type of buyer that enters the shop and hence cannot price
discriminate accordingly. Suppose he/she can use two-part tariffs. Suppose the seller uses a a
couple of two-part tariffs, consisting in a fixed fee and a per-unit price, each two-part tariff
intended for each type. Further suppose the seller prefers to serve the two types of consumers.
We have studied in class that the per-unit price that the high-demand types will pay is equal to the
marginal cost. At what per-unit price would the seller sell the product to the low-demand buyers?
Report the unit price in the answer box with three decimals.
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