price discrimination
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M is a monopolist selling goods G. M's cost function is c(y)=4y where y is the total production of G. Some of M's potential customers are members and get a member magazine with coupons. Member demand curve: X1(p, C)=42-(p-C) where X1(p, C) is member demand, p-C is the price they actually pay, p the official price, and C is price reduction with coupon.
Customers' without membership (and therefore no coupons) demand curve: X2(p, C)=32-(p/2)
With price discrimination, what will be the profit maximizing official price, p and what will C be?
Without price discrimination, what p and quantity will maximize profit?
How much would M be willing to pay for the coupon advertising if that is their only way to price discriminate?
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The condition for profit maximizing monopolist in case of price discrimination is exhibited in this posting.
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Price discrimination question
Is there anyone out there who can help me with this simple(?) question. Would be eternally grateful... I have a test coming up where I need to be able to answer questions like this one.
M is a monopolist selling goods G. M's cost function is c(y)=4y where y is the total production of G. Some of M's potential customers are members and get a member magazine with coupons. Member demand curve: X1(p, C)=42-(p-C) where X1(p, C) is member demand, p-C is the price they actually pay, p the official price, and C is price reduction with coupon.
Customers' without membership (and therefore no coupons) demand curve: X2(p, C)=32-(p/2)
With price discrimination, what will be the profit maximizing official price, p and what will C be?
Without price discrimination, what p and quantity will maximize profit? ...
Purchase this Solution
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