please help solve. Is this also
3rd degree price discrimination?
Homework Answers
Maximize profits given the resale constraint where the price in market 1 exceeds the price in market 2 by $4 or the resale cost or P1 = P2 + 4
Maximize Π = P1Q1 + P2Q2 – MC1Q1 – MC1Q2 + λ(P1 – P2 – 4)
Π = (80 – Q1)Q1 + (60 – Q2)Q2 – 10Q1 – 10Q2 + λ(80 – Q1 – 60 + Q2 – 4)
Π’(Q1) = 0 or 80 – 2Q1 – 10 – λ or λ = 70 – 2Q1
Π’(Q2) = 60 – 2Q2 – 10 + λ or λ = 2Q2 – 50
Q1 – Q2 = 16
Solve these equations
70 + 50 = 2Q2 + 2Q2 and Q1 – Q2 = 16
Q1 + Q2 = 60… (1) and Q1 – Q2 = 16… (2)
16 + Q2 + Q2 = 60 or 2Q2 = 44.
This gives Q2 = 22 units and Q1 = 38 units. Prices are P1 = $42 and P2 = $38.
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please help solve. Is this also
3rd degree price discrimination?
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Please answer clearly and explain. Thank you!
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Please answer clearly and explain.
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