1. You also sell into the market for flints, which is perfectly competitive.The marginal cost of flints is also $1. Some Flint consumers also value chert, but some do not. The demand curve for flint by customers who buy both chert and flint is QF,CH= 50 - PF. The demand curve for flint by customers who buy only flint is QF= 50 - PF. Now suppose that you consider a tying arrangement, in which you only sell cherts to consumers there, too. Is it possible to increase profits over what you got under independent pricing? Prove your answer numerically.

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To determine whether a tying arrangement can increase profits compared to independent pricing we need to compare the profit levels under both scenario... View the full answer