Suppose we have two types of consumers, each buying exactly one unit of the product a monopolist is selling so long as their consumer surplus is non-negative. If the consumer has a choice, she or he will buy the product that gives them the highest consumer surplus the monopolist has estimated the indirect utility (CS) of each type of consumer as V₁-p,+9-2,-27 where z is the quality chosen by the monopolist ie. vertical differentiation. The monopolist does not know each consumer's type. There are 193 type one consumers and 143 type two consumers. Finally suppose the marginal cost for all quantities is zero. The firm can choose any quality between 8 and 19 What is the lowest quality type 1 consumers will demand What is the lowest quality type 2 consumers will demand E What is the participation constraint for type 1) What is the participation constraint for type 2 What is the incentive compatibility constraint for type 1 What is the Incentive compatibility constraint for type 2 In terms of prices (pp)and number of consumers, what is the profit function of the monopolist In terms of choice of quality (2,2)) and number of consumers, what is the profit function of the monopolist What is the optimal value for z What is the optimal value for Z 55 What is the price charged to consumers of type 1 What is the price charged to consumers of type 2 What are the profits of the monopolist: How much consumer surplus do consumers of type 1 have How much consumer surplus do consumers of type 1 have)
Suppose we have two types of consumers, each buying exactly one unit of the product a monopolist is selling so long as their consumer surplus is non-negative. If the consumer has a choice, she or he will buy the product that gives them the highest consumer surplus the monopolist has estimated the indirect utility (CS) of each type of consumer as V₁-p,+9-2,-27 where z is the quality chosen by the monopolist ie. vertical differentiation. The monopolist does not know each consumer's type. There are 193 type one consumers and 143 type two consumers. Finally suppose the marginal cost for all quantities is zero. The firm can choose any quality between 8 and 19 What is the lowest quality type 1 consumers will demand What is the lowest quality type 2 consumers will demand E What is the participation constraint for type 1) What is the participation constraint for type 2 What is the incentive compatibility constraint for type 1 What is the Incentive compatibility constraint for type 2 In terms of prices (pp)and number of consumers, what is the profit function of the monopolist In terms of choice of quality (2,2)) and number of consumers, what is the profit function of the monopolist What is the optimal value for z What is the optimal value for Z 55 What is the price charged to consumers of type 1 What is the price charged to consumers of type 2 What are the profits of the monopolist: How much consumer surplus do consumers of type 1 have How much consumer surplus do consumers of type 1 have)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose we have two types of consumers, each buying exactly one unit of the product a monopolist is selling so long as their consumer surplus is non-negative. if the
consumer has a choice, she or he will buy the product that gives them the highest consumer surplus
the monopolist has estimated the indirect utility (CSi of each type of consumer as
V,--p,+9 z, -27
where z is the quality chosen by the monopolist ie. vertical differentiation. The manopolist does not know each consumer's type. There are 193 type one consumers and
143 type two consumers. Finally suppose the marginal cost for all quantities is zero. The firm can choose any quality between 8 and 19
What is the lowest quality type 1 consumers will demand
What is the lowest quality type 2 consumers will demand
What is the participation constraint for type 1
What is the participation constraint for type 2
What is the Incentive compatibility constraint for type 1
What is the Incentive compatibilty constraint for type 2
In terms of prices (PPaland number of consumers, what is the profit tunction of the monopolist
in terms of choice of quality (2.2g)) and number of consumers, what is the profit function of the monopolist
What is the optimal value for z,
What is the optimal value for z
What is the price charged to consumers of type1
What is the price charged to consumers of type 2
What are the profits of the monopolist
How much consumer surplus do consurmers of type 1 have
How much consumer surplus do consumers of type 1 have
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