What is the optimal price without price discrimination, Cost Accounting

We consider two regions A and B. Each market has the same size (i.e. number of consumers) but differs in the willingness to pay for one unit of the good proposed by the firm. On market i a consumer has a unit-demand for the good and her willingness to pay is equal to Bi with i = A,B and with BA > BB. The firm incurs no cost.

1. The monopoly has perfect and verifiable information on consumer characteristics (location and willingness to pay) and thus is able to price discriminate. Find the optimal prices set by the monopoly in both regions. Is this pricing policy robust to arbitrage if there is no transport cost between both regions?

2. What is the optimal price without price discrimination?

Assume now that BA < 2BB. Moreover, the firm may propose to consumers a service in addition to the good. The valuation for that service is equal to σ in both regions. The transport cost of the service is infinite.

3. If the monopoly decides to price discriminate, determine the price for each product in both regions. Is that pricing policy robust to arbitrage?

The monopoly introduces tie-in sales so that each consumer is now constrained to buy the bundle "good plus service".

4. Determine the price of each bundle if the monopoly price discriminate. Show that the discriminatory pricing policy is robust to arbitrage if and only if σ < BA-BB. Explain this result.

Posted Date: 4/2/2013 4:11:31 AM | Location : United States







Related Discussions:- What is the optimal price without price discrimination, Assignment Help, Ask Question on What is the optimal price without price discrimination, Get Answer, Expert's Help, What is the optimal price without price discrimination Discussions

Write discussion on What is the optimal price without price discrimination
Your posts are moderated
Related Questions
An industrial drill costs $60.000 to purchase and $10,000 to install seven years ago. The market value now is $33.000 and this will decline by 12% of current value each year for th

what is a cost sheet? what are its advantages?

Calculate the β of Maine Corporation from the following data. The prices are at the beginning and at the end of each year     Normal 0 false false

It is the year 2012. The Chief Executive of XYZ Systems Plc, a growing firm in the telecommunication sector, has called your team for an important meeting. "We are expanding": he s

Material Price Variance (MPV) This may be described as the difference amoung the actual price and the standard price of the materials consumed. MPV = Actual quantity used (S

can you guys do a project which is due in 2 weeks

During the dinner hour, the distribution of the inter-arrival time of customers at Burger Barn is predictable to be as follows: Inter-arrival Time Probabi

Standards and Budgets Budgets like you recall from the previous section, are simply plans for expected future performance expressed in quantified monetary terms. Therefore the

Alger Corp wants to buy some construction equipment for $50,000, which has a useful life of 4 years with no salvage value. Alger uses straight-line depreciation. Alger has a tax ra

Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates overhead to be $620,000, machine hours to be 180,000, and direct labor h