Ask Question, Ask an Expert


Ask Microeconomics Expert

1) Price discrimination and bundling

We consider two regions A and B. Each market has the similar size (i.e. number of consumers) but differs in the willingness to pay for one unit of the good proposed by the firm. On market is a consumer has a unit-demand for the good and her willingness to pay is equal to Bi with i = A,B and with BA > BB. The firm incurs no cost.

1. The monopoly has perfect and verifiable information on consumer characteristics (location and willingness to pay) and therefore is able to price discriminate.

Determine the optimal prices set by the monopoly in both regions. Is this pricing policy robust to arbitrage if there is no transport cost between both regions?

2. What is the optimal price without price discrimination?

Suppose now that BA < 2BB. Furthermore, the firm might propose to consumers a service in addition to the good. The valuation for that service is equal to σ in both regions. The transport cost of the service is infinite.

3. If the monopoly decides to price discriminate, find out the price for each product in both regions. Is that pricing policy robust to arbitrage? The monopoly introduces tie-in sales so that each consumer is now constrained to buy the bundle "good plus service".

4. Find out the price of each bundle if the monopoly price discriminates. Demonstrate that the discriminatory pricing policy is robust to arbitrage if and only if σ < BA−BB. describe this result.

2) Discriminatory pricing and the investment in personal data

The purpose is to assess the incentive to acquire information on consumer characteristics. We consider a monopoly. The firm incurs no production cost. There are M consumers with unit demand. Consumers’ valuation for that good, denoted v, is uniformly distributed on the interval [0, 1]. A consumer with a valuation v buys the good if and only if the price for the good p is lower than v (p ≤ v). The firm a priori does not observe the valuation v. But the monopoly has the possibility to obtain information, that will lead to a partition of the consumers into N subintervals of equal length. For instance if N = 2, the monopoly knows whether a consumer has a valuation in the interval [0,1/2] or [1/2,/1] and could set two different prices for each sub-group.

1. Find out the optimal price for each sub-group.

2. Deduce the profit of the monopoly. Is there a benefit to invest in information acquisition for the monopoly?

3) "Should we regulate entry?"

We consider N identical firms that compete à la Cournot. Each firm incurs a constant marginal cost c. The demand for the homogenous good is given by the following function: Q = 1 − P where P denotes the unit price of the good.

1. Find out the Nash equilibrium of the Cournot game. Deduce the profit of each firm at the equilibrium. Express the total surplus at the equilibrium. We introduce an entry stage in the game. The game becomes the following:

Stage 1: firms decide simultaneously to enter the market. Entry has a fixed cost F.

Stage 2: the firms compete à la Cournot

2. Find out the free entry number of firms, i.e. the number of firms such that an additional entry would not be profitable (ignore the integer problem).

3. Express the total surplus if N firms enter the market at stage 1. Deduce the optimal number of firms. Can we say that at the equilibrium too many firms enter on the market? describe.

4) Does fluctuating demand facilitate collusion?

We consider two identical firms that produce the same good. The demand for that good is the function D(p) = 1− p where p is the unit price. Firms incur no cost.

The competition game (simultaneous pricing competition) is repeated infinitely. The discount factor is δ.

We consider the following strategy for each firm:

At period t, firm i :

(i) sets the monopoly price if firm 2 sets the monopoly price at all the previous periods.

(ii) sets a price equal to 0 otherwise

1. What is the condition on δ that ensures that setting the monopoly price at each period is an equilibrium of the dynamic game?

We introduce fluctuations in the market demand. At each period the demand is, with equal probability, either 0 or 2(1−p).

2. What is the new condition on δ which makes collusion on the monopoly price stable?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91752

Have any Question? 

Related Questions in Microeconomics

Assignment1in your own words please define describe and use

Assignment 1. IN YOUR OWN WORDS, please define, describe and use an example for the following term (see below). The term (including example) should be no more than 50 words.The following rubric is used to assess each ter ...

Assignmentlearning objectives covered1explain 3 ways the

Assignment Learning Objectives Covered: 1. Explain 3 ways the statement of goals, application of rewards, and institution of discipline affect and motivate ethical behavior in individuals 2. Demonstrate how roles and aut ...

Fiscal policy modulewhich has a larger effect on aggregate

Fiscal Policy Module Which has a larger effect on aggregate demand: an increase in government expenditure or an equal-sized decrease in taxes? Explain your answer. To eliminate a recessionary gap, which fiscal policy sho ...

Assignment questionsque1 why validation of the software

Assignment Questions: Que.1 Why validation of the software requirement is necessary? List some conditions that should be checked in the validation phase of software requirement. Que.2 Six Sigma is used to reduce the defe ...

Assignmentwhat are the most important knowledge assets at

Assignment What are the most important knowledge assets at Dirt Bikes? What functions and employee positions are responsible for creating, distributing, and using these knowledge assets? Are all of these assets explicit ...

Assignmentwhat are the two distinguishing properties of a

Assignment What are the two distinguishing properties of a public good? Explain each in one or two sentences. Give an example of a public good different from any of the examples in your text or my notes. What is the "fre ...

Introduction to economic evaluation of health promotion

Introduction to Economic Evaluation of Health Promotion Interventions Assignment Evaluating Cost-effectiveness using Markov cohort models: The HPV case The goal of this assignment is to provide students with applied prac ...

Assignment money and pricethe organizations strategic plan

Assignment: Money and Price The organization's strategic plan you wrote about calls for an aggressive growth plan, requiring investment in facilities and equipment, growth in productivity, and labor over the next five ye ...

Question 1which of the following has not been identified as

Question 1 Which of the following has NOT been identified as a basic consumer right? Consumers have a right to safe products. Consumers have a right to collude. Consumers have a right to be informed about a product. Cons ...

Assignmentquestion a daoism amp confucianism as fisher

Assignment Question A: DAOISM & CONFUCIANISM. As Fisher states in our textbook, "Individuals often harmonize the apparently opposite characteristics of Daoism and Confucianism in their own lives." In what specific ways m ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen