Question

Exercices chapter 14 Part 2 Exercise 1 Suppose that a firm produces (cheap) MP3 player at a constant marginal cost of $1. There are tuo types of consumers that the firm cannot distinguish. Con- sumers use the MP3 player with songs in MP3 format. Type 1 consumers have the demand for songs q1 8 -p, while agents of type 2 have demand q2 3(8 ps), where ps is the price of a song. There are 50 consumers of type 1 and 10 of type 2. The firm makes its player incompatible with MP3 files supphed by anybody else. Its marginal cost of supplying songs is constant at G What is then the optimal pricing strategy? Could it be better to sell only to agents of type 29 Exercise 2 Are we sure that Tied sales always increase profits for the firm? Give a convincing argument one way or another

Answer 1

84 3635-10. 3625 nuaal 25 +84 -35-