Unformatted text preview: M preferable? 4.) Please solve Problem 1, p. 159 in PRN [Problem 9, p. 152] (it might be helpful to read ch. 7.5.1 [ch. 3.4] ﬁrst), but with the following modiﬁcations: indicate the ﬁxed costs for quality level z = 1 as F 1 , and those for quality level z = 2 as F 2 (rather than ﬁxing these costs at 65 z 2 ). For this general speciﬁcation, answer questions a) - c). In addition, answer the following: d) Which quality level is eﬃcient (recall how we deﬁned this notion in class) when ﬁxed costs are at arbitrary levels F 1 and F 2 ? For which combination of ( F 1 ,F 2 ) will M in fact provide the eﬃcient quality? For which combinations will he oﬀer a quality level which is too high/low? Please explain. 1...
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- Fall '08
- Price Discrimination, Quality Level, Christoph Luelfesmann