A cellular service provider offers two types of data plans: 5GB & 10GB. There are two...

 

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A cellular service provider offers two types of data plans: 5GB & 10GB. There are two types of customers in the market: light usage and heavy usage. The cost of both data plans, the each customer type's value of each plan, and the potential profit are summarized in the table below. 5 GB 10 GB Cost 10 20 WTP Light User 15 20 Heavy User 20 35 Potential Profit Light 5 0 a) Assume there are 200 heavy users and 100 light users. If the cellular service provider knew each customer's type, what pricing scheme would they devise to maximize their profit? What are their profits under this scheme? b) If the cellular service provider does not know each customer's type, what will be the result of the pricing scheme you devised in part (a). e) What are the profits under this pricing scheme? Heavy 10 15 c) What are the participation and the incentive-compatibility constraints for both users? f) What are the profits from just serving heavy users? d) What is the profit maximizing pricing scheme that satisfies both customer types participation constraints and incentive-compatibility constraints? I A cellular service provider offers two types of data plans: 5GB & 10GB. There are two types of customers in the market: light usage and heavy usage. The cost of both data plans, the each customer type's value of each plan, and the potential profit are summarized in the table below. 5 GB 10 GB Cost 10 20 WTP Light User 15 20 Heavy User 20 35 Potential Profit Light 5 0 a) Assume there are 200 heavy users and 100 light users. If the cellular service provider knew each customer's type, what pricing scheme would they devise to maximize their profit? What are their profits under this scheme? b) If the cellular service provider does not know each customer's type, what will be the result of the pricing scheme you devised in part (a). e) What are the profits under this pricing scheme? Heavy 10 15 c) What are the participation and the incentive-compatibility constraints for both users? f) What are the profits from just serving heavy users? d) What is the profit maximizing pricing scheme that satisfies both customer types participation constraints and incentive-compatibility constraints? I

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a The cellular service provider should offer the 10GB plan at a price of 20 for heavy users and the ... View the full answer