ECON homework need help Suppose that Comcast is trying to de

ECON homework need help

Suppose that Comcast is trying to decide how to price two channels (NESN, WGBH) which it wishes to sell to four consumers (Charlie, Deval, Mitt, and Paul), whose willingness to pay for each channel are listed be- low. Comcast incurs a marginal cost of $1 for selling an additional channel NESN WGBIH to a consumer.Deval Mitt Paul Charlie16 10 14 4 15 18 (a) Suppose Comcast sells each channel individually. What are the op- (b) Suppose Comcast sells the channels only as bundle. What is the (c) Suppose Comcast engages in a mixed bundling strategy. What is the Consider the market for steel which is made of two identical firms (U.S timal prices who purchases which channel? optimal bundle price and who purchases it? optimal prices and who purchases what? Steel and Bethlehem) which have identical marginal costs of S5. The demand for steel is Q 80- 4P (a) Suppose the firms compete ala Cournot. What is the equilibrium price and quantity for each firm?

Solution

a.

So When NESN is priced at 10 then profit is maximum and only Paul will not purchase

and when WGBH is priced at 15 then profit is maximum and Paul and Deval will suscribe.

b.

c. As here the reservation prices are more than MC for all the products and buyers so the optimal price for mixed strategy will be same as optimal bundle strategy so the price will be 20-1-1 = 18 and profit will be 72 and all will buy.

Price of NESN	Cost/unit	Profit/unit	No of units	Profit			Maximum willingness	Will Pay at 10
16	1	15	1	15		Charlie	16	yes
10	1	9	3	27	Maximum Profit	Deval	10	yes
14	1	13	2	26		Mitt	14	yes
3	1	2	4	8		Paul	3	no
Price of WGBH	Cost/unit	Profit/unit	No of units	Profit			Maximum willingness	Will Pay at 15
4	1	3	4	12		Charlie	4	yes
15	1	14	2	28	Maximum Profit	Deval	15	yes
9	1	8	3	24		Mitt	9	no
18	1	17	1	17		Paul	18	no