MegaUpload is a payable file sharing website company. Suppose that 2 millions consumers value their access...

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MegaUpload is a payable file sharing website company. Suppose that 2 millions consumers value their access to MegaUpload with a utility function given by U(0) = 100n - p, where 0 = [0, 2] is their uniformly distributed (heterogeneous) valuation for exchanging files, n is the expected number of (millions) participants in the network and p is the price for their access to the web site. The cost of maintaining an access is 1 Euro. 1. (2 points) Knowing that consumer will choose to use MegaUpload when their utility is greater than 0, compute the demand for MegaUpload access. 2. (2 points) Compute the equilibrium network size n at p = 2 3. (2 points) Compute and display in a diagram the network critical mass 4. (2 points) Compute the equilibrium network size n when MegaUpload operates in perfectly competitive market. 5. (2 points) How does it change if MegaUpload is the monopolist? 6. (1 points) Consider a duopoly case competing à la Cournot (e.g. MegaUpload vs. Rapid- Share). How much would MegaUpload lose from opening the market to a competitor? 7. (1 points) What is the socially optimal size of the network? 8. (1 points) What benefit does MegaUpload get from offering more rapid file transfers so that the consumers' valuation increase 0 € [0,4]? MegaUpload is a payable file sharing website company. Suppose that 2 millions consumers value their access to MegaUpload with a utility function given by U(0) = 100n - p, where 0 = [0, 2] is their uniformly distributed (heterogeneous) valuation for exchanging files, n is the expected number of (millions) participants in the network and p is the price for their access to the web site. The cost of maintaining an access is 1 Euro. 1. (2 points) Knowing that consumer will choose to use MegaUpload when their utility is greater than 0, compute the demand for MegaUpload access. 2. (2 points) Compute the equilibrium network size n at p = 2 3. (2 points) Compute and display in a diagram the network critical mass 4. (2 points) Compute the equilibrium network size n when MegaUpload operates in perfectly competitive market. 5. (2 points) How does it change if MegaUpload is the monopolist? 6. (1 points) Consider a duopoly case competing à la Cournot (e.g. MegaUpload vs. Rapid- Share). How much would MegaUpload lose from opening the market to a competitor? 7. (1 points) What is the socially optimal size of the network? 8. (1 points) What benefit does MegaUpload get from offering more rapid file transfers so that the consumers' valuation increase 0 € [0,4]?

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1 To compute the demand for MegaUpload access we need to find the number of consumers whose utility is greater than 0 Given that the cost of maintaining an access is 1 Euro and consumer will choose to ... View the full answer