Question 7 Suppose there are two types of individuals: Low demand individuals with demand Qp(P) = 16 - 4P, and high-demand individuals with Qp(P) = 20 - 2P. The firm wants to offer two pricing schedules (Q1, F1) and (Q2, F2), where F1 and F2 are fixed fees, and Q1 = 4, Q2 = 18 are the amounts of consumption a person would receives if they paid these fees. The firm wants to choose F and F2 to maximizes profits (given the choice of Qi and Q2), but the firm cannot distinguish the two types of consumers. Thus, F and F2 must be chosen such that each type of consumer selects the contract designed for them (low-demand consumer should choose (Q1, F1), and high-demand consumer should choose (Q2, F2).) %3D %3D F1 = , F2 =

Question 7 Suppose there are two types of individuals: Low demand individuals with demand Qp(P) = 16 - 4P, and high-demand individuals with Qp(P) = 20 - 2P. The firm wants to offer two pricing schedules (Q1, F1) and (Q2, F2), where F1 and F2 are fixed fees, and Q1 = 4, Q2 = 18 are the amounts of consumption a person would receives if they paid these fees. The firm wants to choose F and F2 to maximizes profits (given the choice of Qi and Q2), but the firm cannot distinguish the two types of consumers. Thus, F and F2 must be chosen such that each type of consumer selects the contract designed for them (low-demand consumer should choose (Q1, F1), and high-demand consumer should choose (Q2, F2).) %3D %3D F1 = , F2 =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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