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Qusetion: Consider the market for a software application. There are 20 consumers who value technical support, which they can only receive if they purchase the application. There are 10 consumers who do not value technical support. Consumers who value technical support obtain a payoff of 2n - p if they purchase the software and n if they pirate the software, where n is the total number of users, and p is price. Consumers who do not value technical support receive payoff of n - p if they purchase the software, and n is they pirate the software. Suppose the software is costless to both produce and to protect from piracy.

If the software is protected, so that piracy is not an option for consumers, what is the firm's (single) profit-maximizing price?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M92583672

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