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You are a monopolist. Suppose there are two types of people who buy your product, groups 1 and 2. Their separate demand functions are given by:

D1(p)= A-bp
D2(p)= C-dp

for A,C,b,d>0. Total demand for your product is given by D(p) = D1(p) +D2(p).

a) What is total profit if you set a single price?

b) What is total profit if you use third-degree price discrimination?

c) Under what condition is the optimal p1 under third-degree price discrimination greater than p2? (in terms of the parameters of the model)

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M941111

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