Consider the car manufacturer Toyota. The firm offers two brands, Toyota and Lexus, with similar models. Assume the following willingness to pay for two car models: What if Toyota charges $25,000 for the Camry and $39,000 for the Lexus ES? Is this pricing scheme incentive compatible? If not, assuming the prices for Camry's are fixed, what should the price of Lexus be? Table 10.1 Consumer Valuations for Camrys and ESs Toyota Camry Lexus ES Budget consumer $28,000 $31,000 Luxury consumer $30,000 $43,000

Consider the car manufacturer Toyota. The firm offers two brands, Toyota and Lexus, with similar models. Assume the following willingness to pay for two car models: What if Toyota charges $25,000 for the Camry and $39,000 for the Lexus ES? Is this pricing scheme incentive compatible? If not, assuming the prices for Camry's are fixed, what should the price of Lexus be? Table 10.1 Consumer Valuations for Camrys and ESs Toyota Camry Lexus ES Budget consumer $28,000 $31,000 Luxury consumer $30,000 $43,000

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

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