Consider a multi-product monopolist that produces two goods q1 = Q1 (P1, P2) Bonus question and q2 = Q2 (P1, P2) where the demand functions are defined as Q; (P1, P2) = a – i + dp; for i, j = 1,2 where ò > 0, d can be zero, positive or negative. Cost function takes the form C (q1, 92) = c (q1 + 92) – sq192 where c>0 and s > 0. %3! a. What sign does d need to have for goods to be substitutes? To be complements? Explain. b. Under what conditions are there economies of scope? Explain. c. Consider the case of linked demands d + 0 and unlinked costs s = 0. Assume c < 24 and 6² > d². Determine the optimal prices (pi, p5). Compare these prices with the ones that arise under the case of separate monopolists. Explain the intuition behind your results.

Consider a multi-product monopolist that produces two goods q1 = Q1 (P1, P2) Bonus question and q2 = Q2 (P1, P2) where the demand functions are defined as Q; (P1, P2) = a – i + dp; for i, j = 1,2 where ò > 0, d can be zero, positive or negative. Cost function takes the form C (q1, 92) = c (q1 + 92) – sq192 where c>0 and s > 0. %3! a. What sign does d need to have for goods to be substitutes? To be complements? Explain. b. Under what conditions are there economies of scope? Explain. c. Consider the case of linked demands d + 0 and unlinked costs s = 0. Assume c < 24 and 6² > d². Determine the optimal prices (pi, p5). Compare these prices with the ones that arise under the case of separate monopolists. Explain the intuition behind your results.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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