Suppose the monopolist in Problem 13 offers a menu of two-part tariff plans, with one plan intended

Question:

Suppose the monopolist in Problem 13 offers a menu of two-part tariff plans, with one plan intended for each type of consumer. Suppose too, as in our discussion in the text, that for any per-minute price PL in the low-demand plan, the fixed fee in the low-demand plan leaves a low-demand consumer with zero surplus; that the number of minutes in the low-demand plan is capped at the number of minutes desired by a low-demand consumer at that plan's per-minute price; and that the high-demand plan has a per-minute price of $0.10 per minute and a fixed fee that leaves the high-demand consumer approximately indifferent between the low- and high-demand plans. Suppose that there are 100 high-demand consumers and 300 low-demand consumers. Will the monopolist's profit be higher when the per-minute price in the low-demand plan is $0.15 or $0.20?
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Microeconomics

ISBN: 978-1118572276

5th edition

Authors: David Besanko, Ronald Braeutigam

Question Posted: