Suppose that Pokhara acquires customer-specific information through (costless) market research and, thereby, a more accurate estimate of how much each consumer values its jackets. More specifically, the information allows Pokhara to identify and split the consumers into two groups. Group 1 has a v within the subinterval [0,1/2] while Group 2 has a v within the subinterval (1/2, 1]. This allows Pokhara to charge different prices to different groups of consumers, p₁ and p2. Further assume that consumers cannot move between groups nor resell the jacket between themselves. d. e. f. group Write down Pokhara's profit maximization problem for each of consumers. Derive the optimal prices for each group p** and p**. (Hint: note that for each group, the firm can at most has a demand of 1/2. If Pokhara can already sell to all consumers in the group, it has no reason to further decrease its price for that group.) Following [e], write down Pokhara's profit **, consumer surplus CS** and total surplus W** when it sets those group-based prices.

Suppose that Pokhara acquires customer-specific information through (costless) market research and, thereby, a more accurate estimate of how much each consumer values its jackets. More specifically, the information allows Pokhara to identify and split the consumers into two groups. Group 1 has a v within the subinterval [0,1/2] while Group 2 has a v within the subinterval (1/2, 1]. This allows Pokhara to charge different prices to different groups of consumers, p₁ and p2. Further assume that consumers cannot move between groups nor resell the jacket between themselves. d. e. f. group Write down Pokhara's profit maximization problem for each of consumers. Derive the optimal prices for each group p and p. (Hint: note that for each group, the firm can at most has a demand of 1/2. If Pokhara can already sell to all consumers in the group, it has no reason to further decrease its price for that group.) Following [e], write down Pokhara's profit , consumer surplus CS and total surplus W** when it sets those group-based prices.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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