Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

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

Assignment maximizing profits and minimizing lossesconsider

Assignment: Maximizing Profits and Minimizing Losses Consider a supplier of agricultural equipment who is deciding how much of two products should be produced by his firm. You determine what the two products are. Now cre ...

Economics and quantitative analysis assignmenttopic -

ECONOMICS AND QUANTITATIVE ANALYSIS ASSIGNMENT TOPIC - REGRESSION ANALYSIS Instructions - Background One of the biggest challenges in the higher education sector has been the recent growth of online universities. The Onl ...

Assignmentvirtually all general managers face

Assignment Virtually all general managers face capital-budgeting decisions in the course of their careers. The most common of these is the simple "yes" versus "no" choice about a capital investment. Regardless of the typ ...

Watch the video on the link belowthen answer the following

Watch the video on the link below. Then answer the following questions: 1. Would the incentives discussed in the video be able to work in a college setting? Why or why not? 2. Have you ever changed your behavior because ...

Leasing equipmentfor catherine owens onlybullsuggest one

Leasing Equipment For Catherine Owens Only • Suggest one key economic factor that motivates leasing as an option in acquiring an asset. Explain the potential asymmetries that may exist where leasing may be beneficial to ...

1 a explain in clear language the economic inefficiency

1. a) Explain in clear language the economic inefficiency associated with adverse selection. b) The ACA (aka Obamacare) included an insurance mandate, which forces everyone to purchase insurance or face a penalty. Under ...

Question 1 the agrizone corporation invests 140140 million

Question 1. The Agrizone Corporation invests $14.014.0 million in a new inventory tracking system. A. The opportunity cost of Agrizone's decision is the value of leaving the money unutilized. B. The opportunity cost of A ...

Assignment voluntourism-go to httpwwwvoluntourismorgreview

Assignment: VolunTourism- Go to http://www.voluntourism.org Review the home page to understand the resources available on this web site and to get a feeling for what VolunTourism is.On the menu (left screen) under "Who A ...

Desserts by jb case studyjay brown jb to his friends is a

Desserts by J.B Case Study Jay Brown (J.B. to his friends) is a student at the North-west Culinary Institute and specializes in preparing elab-orate desserts. After graduation. J.B. wants to open up a bakery. The bakery. ...

Great depression economy paperwritten assignmentplease

Great depression , economy paper Written Assignment Please provide a comprehensive answer to the following two questions: 1) Which were the main causes of the Great Depression? 2) Why did the Great Depression last so lon ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

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