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A price discriminating monopolist sells coffee to consumers with the following prefer- enoes: 1L; (9;, t) = 23 t. Here, 6. 6 {93,191,} denotes...

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Continue to assume that the monopolist cannot distinguish between the consumers:

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2. A price discriminating monopolist sells coffee to consumers with the following prefer-
enoes: 1L; (9;, t) = 23§¢§ — t. Here, 6.: 6 {93,191,} denotes consumer i’s type, which could be either high 6;; = 20 or
low 6;, = 15. Units (ounces) of coffee is denoted by y, and t is the price. Assume that
there are equally many consumers of each type. The coffee shop has marginal cost
c = 5 cents and seeks to maximize profits. Suppose that the consumers get zero utility
if they do not purchase any cofl‘ee. (d) Continue to assume that the monopolist cannot distinguish between the con-
sumers, and that the proportion of high types increases to 3. How does this
change the monopolist’s profit maximizing pricing strategy?

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