This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Department of Economics University of California, Berkeley ECON 100A Spring 2010- Section 18 GSI: Antonio Rosato Pricing with Market Power Price Discrimination Today we are going to go over two exercises on Price Discrimination. Chapter 11, Exercise 8 Sals satellite company broadcasts TV to subscribers in Los Angeles and New York. The demand functions for each of these two groups are Q NY = 60- . 25 P NY and Q LA = 100- . 50 P LA where Q is in thousands of subscriptions per year and P is the subscription price per year. The cost of providing Q units of service is given by C = 1000 + 40 Q where Q = Q NY + Q LA . a) What are the profit-maximizing prices and quantities for the New York and Los Angeles markets? b) As a consequence of a new satellite that the Pentagon recently deployed, people in Los Angeles receive Sals New York broadcasts, and people in New York receive Sals Los Angeles broadcasts. As a result, anyone in New York or Los Angeles can receive Sals broadcasts by subscribing in either city. Thus Sal can charge only areceive Sals broadcasts by subscribing in either city....
View Full Document
- Spring '08