Problem 3 Price Discrimination. Suppose that Apple announced its new VR headset earlier this year and the pre-sale has already begun. There are two groups of consumers: dedicated VR users (H) and casual users (L). The dedicated users will buy at the pre-sale phase, while the casual users will only buy when the actual product becomes available. Their demands for the VR headset are:QH = 2000 − P and QL = 4000 − 4PSuppose that the marginal cost for Apple is $500 per headset. What are the profit- maximizing prices for each group of consumers? What are the quantities sold to each group under these prices?Suppose that Apple’s announcement is a big success, and now even casual users are looking to buy during the pre-sale Assuming that the marginal cost remains unchanged, what would be the optimal price and quantity for Apple? (i.e., what is the optimal uniform price). Will Apple sell more headsets comparing to part (a)?How does the successful announcement affect dedicated users’ surplus? How about casual users?

Let's approach this problem step-by-step:a) Profit-maximizing prices and quantities for each…

Answered: Problem 3 Price Discrimination. Suppose…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Problem 3 Price Discrimination. Suppose that Apple announced its new VR headset earlier this year and the pre-sale has already begun. There are two groups of consumers: dedicated VR users (H) and casual users (L). The dedicated users will buy at the pre-sale phase, while the casual users will only buy when the actual product becomes available. Their demands for the VR headset are:

Q_H = 2000 − P and Q_L = 4000 − 4P

Suppose that the marginal cost for Apple is $500 per headset. What are the profit- maximizing prices for each group of consumers? What are the quantities sold to each group under these prices?
Suppose that Apple’s announcement is a big success, and now even casual users are looking to buy during the pre-sale Assuming that the marginal cost remains unchanged, what would be the optimal price and quantity for Apple? (i.e., what is the optimal uniform price). Will Apple sell more headsets comparing to part (a)?
How does the successful announcement affect dedicated users’ surplus? How about casual users?

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