Question

PROBLEM II. Suppose that there is a monopolist with two units of a durable good. There are only two consumers, where one consumer has a willingness to pay of 40 and the other has that of 30. The market for the durable good only lasts two periods. In each period the monopolist sets a price and the consumers decide whether to purchase or not. Suppose that both consumers have the same discount factor δ and the monopolist has a discount factor η Q5. Under what condition on o and n does the consumer with the higher willingness to pay only buy the good in period 1 at the monopolist's profit-maximizing prices? (a) n 2 (2 5)/3 (b) 12 (1 + 2n)/3 (c) η2(1+6)/2 (d) 12 (1 + r)/2 (e) n 2 (1+36)/4 Q6. When 0.7 and -0.95, what is the profit-maximizing price in period 1 for the monopolist? (a) 30 (b) 35 (c) 33 (d) 37 (e) 40 Q7. When δ-: 0.95 and η-0.7, what is the profit-maximizing price in period 1 for the monopolist?

Answer 1