Question: Two-sided markets are economic platforms having two distinct user groups that provide each other with network benefits. Said differently, in such a market, the products

Two-sided markets are economic platforms having two distinct user groups that provide each other with network benefits. Said differently, in such a market, the products being sold are complementary, and an increase in demand of one product is associated with an increase demand for the other. Suppose that the products being sold are products 1 and product 2. The demands for products 1 and 2 are denoted by q1 and q2 respectively. Similarly the prices for products

1 and 2 are denoted by p1 and p2 respectively. The demand for products 1 and 2 are given by:

q1 = 15 5*p1 - 2*p2

q2 = 12 4*p2 - 3*p1

a) Your company produces both products 1 and 2, and needs to determine prices p1 and p2 that will maximize the total revenue from the sale of both products. What are the optimal prices p1 and p2, and what is the total revenue? Provide your answer to two decimal places. (20 points)

b) Due to competition, the firm would like to limit the maximum price of product 2 to be $0.50. What is the total revenue now? Provide your answer to two decimal places. (10 points)

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