Question

2. A monopolist faces two consumers who have the demand curves Pa = 4 - Qa and.P, = 2 - Qb. Her fixed costs and marginal cost are zero. a.

Suppose she can identify which consumer has which demand curve. Compute the optimal block-pricing (perfectly price discriminating) offer she will make to each consumer. b. Suppose she can't distinguish which customer is which. Compute the optimal second-degree price discriminating prices for this monopolist. Assume the product can only be sold in discrete units. c. Compare social welfare between perfect and second-degree price discrimination.

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