Suppose a monopolist knows it has two types of customers. The inverse demand for the customers in the first market is P = 50 – Q while the inverse demand for the customers in the second market is P = 40 – 2Q. The marginal cost is €10 in both markets. Suppose the firm wishes to charge a two-part tariff to its customers but it cannot distinguish between the customers in the first and second markets. Calculate the entry (fixed) fee that the firm should charge in these circumstances
Suppose a monopolist knows it has two types of customers. The inverse demand for the customers in the first market is P = 50 – Q while the inverse demand for the customers in the second market is P = 40 – 2Q. The marginal cost is €10 in both markets. Suppose the firm wishes to charge a two-part tariff to its customers but it cannot distinguish between the customers in the first and second markets. Calculate the entry (fixed) fee that the firm should charge in these circumstances
Chapter8: Monopoly
Section: Chapter Questions
Problem 15SQ
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Suppose a monopolist knows it has two types of customers. The inverse
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