A monopolist is selling the same product in two different markets, seniors (S) and everyone else (E).

A monopolist is selling the same product in two different markets, seniors (S) and everyone else (E). The demand for the product by everyone else (E) is different than the demand by seniors (S).

Demand everyone else: P= 12 - 2Q

Demand Seniors: P= 14 - Q

The firm's constant marginal cost is MC= 4. There is no fixed cost.

a) What price would the monopolist charge in each market if it can price discriminate?

Suppose now that a new regulation states that this product should be sold at the same price in every market.

b) what price would the monopolist charge?

c) Suppose the monopolist cannot price discriminate, (as in part b). In addition, it can set a two part tariff. Find the unit price and fixed fee that maximizes profits.

Expert Solution

Rahul Sunny answered 2 years ago

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