Mobile internet provider knows that there are two types of users with 1000 users of each type. Type A users are those who use only mobile internet, even at home. For each user of Type A demand is given by q(p)=100-2p, where q(p) is the quantity of data demanded when the unit price is p. Type B users are those who use mobile internet only when they do not have access to wifi. For each user of Type B demand is given by q(p)=90-3p. The internet provider cannot distinguish types of users and offer them individual prices. However, it can use second-degree price discrimination. That is it can offer a menu of bundles, each bundle specifying the total amount of internet traffic and the total price for this traffic. Then each user chooses their preferred bundle out of the menu. Find the maximal revenue that this provider can achieve.

Mobile internet provider knows that there are two types of users with 1000 users of each type. Type A users are those who use only mobile internet, even at home. For each user of Type A demand is given by q(p)=100-2p, where q(p) is the quantity of data demanded when the unit price is p. Type B users are those who use mobile internet only when they do not have access to wifi. For each user of Type B demand is given by q(p)=90-3p. The internet provider cannot distinguish types of users and offer them individual prices. However, it can use second-degree price discrimination. That is it can offer a menu of bundles, each bundle specifying the total amount of internet traffic and the total price for this traffic. Then each user chooses their preferred bundle out of the menu. Find the maximal revenue that this provider can achieve.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.4P

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