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Q: Price Discrimination ( No Answer,   0 Comments )
Question  
Subject: Price Discrimination
Category: Business and Money > Economics
Asked by: dime365-ga
List Price: $12.00
Posted: 17 Oct 2003 18:06 PDT
Expires: 18 Oct 2003 16:55 PDT
Question ID: 267350
1. ROM is a publishing company which serves subscribers in Toronto and
New York.  The demand functions in New York - Q= 50-(1/3)P and in
Toronto - Q=80-(2/3)P where Q is the subscribers and P is the
subscription price per year.  The cost providing Q units of service is
C=1000+30Q.

a) Suppose that the 2 markets are segmented.  What are the profit
maximizing prices and quantities in the two cities?

b) As a result of a new service provided recently by a new company,
people in NY can recieve the same subscription fee as people in
toronto and vice versa.  What will the profit maximizing price and
quantity be now?

c) compare and explain the differences that arise in the pricing and
sales strategies under the two senarios (a) and (b).  Compare profits
in two situations and explain why they differ.

d) based on consumers surplus criterion which situatio  is preferred
by people in NY and people in toronto?



Note: hi, ive been trying this answer for about an hour.. i think its
related to 3rd degree price discrimination.  Im not sure whether to
use inverse demand or the demand function when plugging into the
TR-TC.
Im assuming for b) quantity will still be the same? im not sure

Thanks
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