Consider the optimal pricing policy of a monopolist selling information goods. There are three types of consumers, and there is one consumer of each type. The monopolist knows that there are three types of consumers and the valuations of each type (i.e. the tables below), but cannot tell to which type a consumer belongs (so that personalised pricing is impossible). As the products are in formation goods, marginal costs are zero, and fixed costs are already sunk. Assume throughout that, when a player is indifferent, she will choose the higher-priced version. The monopolist can offer up to three versions (versions X, Y and Z) of the information good. The three types of consumers have valuations for the different versions as given in the following table: Version x Version Y Version z 1 consumer: 70 120 130 2 consumer: 140 140 200 3 consumer: 170 180 250
Consider the optimal pricing policy of a monopolist selling information goods. There are three
types of consumers, and there is one consumer of each type. The monopolist knows that there are
three types of consumers and the valuations of each type (i.e. the tables below), but cannot tell to
which type a consumer belongs (so that personalised pricing is impossible). As the products are in
formation goods, marginal costs are zero, and fixed costs are already sunk. Assume throughout
that, when a player is indifferent, she will choose the higher-priced version.
The monopolist can offer up to three versions (versions X, Y and Z) of the information good. The
three types of consumers have valuations for the different versions as given in the following table:
| Version x | Version Y | Version z | |
| 1 consumer: | 70 | 120 | 130 |
| 2 consumer: | 140 | 140 | 200 |
| 3 consumer: | 170 | 180 | 250 |
(I.e.: If the type 1 consumer is charged a price of 60 for version X and a price of 100 for version Y,
the consumer will choose version Y, as the surplus from Y (120 – 100 = 20) is higher than the sur-
plus from X (70 – 60 = 10).)
Each consumer buys at most one version of the product.
The monopolist can choose which versions they want to offer, and the price of these versions.
What versions should the monopolist offer and at what prices?
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