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What is customer surplus

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Reference no: EM13684735

1. Presume that there is one manufacturer and one retailer. Final inverse demand is P(q) = 100-2q.

2. Marginal cost of the manufacture is 10 and the retailer has a marginal retailing cost of 5 in addition to the wholesale price charged by the manufacturer.

3. Discover the wholesale price by the manufacturer (w) and the final price set by the retailer (p).

4. What is customer surplus? If the manufacturer could specify a minimum price which the retailer can charge would this solve the double marginalization problem? What price would it specify?

Reference no: EM13684735

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