Assignment_3

Assignment_3 - ) where & 2 f 1 ; 2 g denotes the...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
EC 501 Micro Assignment 3 Due 4/5/10 in class .") 2. 7.4 ("Suppose there is a 50-50 chance. .") 3. 7.10 ("In some cases individuals may care. .") 4. 13.4 ("Suppose that Robinson Crusoe. .") 5. 13.6 ("In the country of Ruritanina. .") 6. 14.2 ("A monopolist faces a market demand curve. .") 7. 14.6 ("Suppose a monopoly can produce. .") 8. Suppose a monopolist who produces an output y at marginal cost c wants to implement a non-linear pricing scheme to maximize pro±ts in a market where there are two kinds of consumers. The utility functions for the two types of consumers are: ( y
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ) where & 2 f 1 ; 2 g denotes the consumer type, and where u is a concave function. The seller cannot tell the type of any one consumer, but he estimates that Pr ( & = 1) = q 2 (0 ; 1) : (a) Set up the seller&s maximization problem and ±nd the conditions for the optimal pricing schedule. (b) Suppose that the seller&s marginal cost c = 1 and that the consumers&utility functions take the form: &u ( y ) = 5( & + 1) log (1 + y ) Suppose also that q = 1 = 2 : Find the optimal pricing schedule in this special case. Verify that the solution entails a quantity discount. 1...
View Full Document

This note was uploaded on 11/09/2010 for the course CAS ec399 taught by Professor Tack during the Spring '10 term at BCUC.

Ask a homework question - tutors are online