HW III Discrimination Bundling Tying

HW III Discrimination Bundling Tying - better through...

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HW III Bus 247 Spring 2008 Professor Bradbury Please answer each of the following questions. This assignment must be turned in typed together with your final paper by May 20 th . The assignment will be graded for accuracy. 1) When firms are able to achieve perfect price discrimination, a. What is the value of consumer surplus? b. What share of total social welfare is acquired by the firm? 2) In your own words define arbitrage and describe how the presence of arbitrage may limit a firms ability to price discriminate. 3) A monopolist firm faces two groups of consumers that differ in terms of their elasticity. Group 1: 1 = 2 Group 2: 2 = 6 a. Calculate the ratio P 1 P 2 that will be charged by the profit maximizing firm practicing price discrimination. b. If P 2 =6, what is the value of P 1 ? c. Which group of consumers must pay the higher price and why? d. Suppose that the elasticities of group 1 and group 2 were equal, could the firm still do
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Unformatted text preview: better through practicing price discrimination, why or why not? 4) State whether each of the following corresponds more closely to bundling or tying. a. Lift tickets at a ski resort. b. “Buy one get one free” offers. c. Purchase of cell phone minutes. d. Purchase of cell phone plans. (phone, minutes, text, web, etc. .) e. Sale of Windows operating system coupled with Explorer net browser. 5) When a firm successfully bundles what is the value of consumer surplus? What portion of total social welfare is acquired by the firm? 6) When firms are able to practice first degree price discrimination, bundling, or tying, what is the net effect on total social welfare? Do these practices help of hurt the consumer in comparison to the perfectly competitive market equilibrium?...
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This note was uploaded on 02/15/2011 for the course ECON 247 taught by Professor Bradberry during the Fall '10 term at CUNY Queens.

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HW III Discrimination Bundling Tying - better through...

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