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The manager of a firm wants to implement two-part pricing for a product having two different types of consumers

Marketing

The manager of a firm wants to implement two-part pricing for a product having two different types of consumers. The market has 10 consumers with a lower willingness to pay with a demand curve given by Qa = 8 - P, and 10 consumers with a higher willingness to pay with a demand curve given by Qb = 10 - P. The marginal cost (and the average cost) is constant at 2, and there are no fixed costs. Assume that he sets only one entry fee and one usage fee.

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The two-part pricing will mean separate prices for consumers with lower willingness to pay (a):

Hence monopolist will sell the 5 units at the price 3 to customers who are willing to pay lower.

Price for higher willing to pay customers (b):

 

Hence monopolist will sell the 6 units at the price 4 to customers who are willing to pay higher.

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