American Tire and Rubber Company sells identical radial tires through two channels
1) sell under the firm’s own brand name;
2) sell to discount stores for private labeling.
Marginal Cost is a constant $10 per tire, regardless of the sub-market in which the tire is sold. The firm has estimated the following demand curves for each market:
P1 = 70 - 0.5 q1 (brand name)
P2 = 20 - 0.2 q2 (private brand)
The firm’s total cost function is given as: TC = 10Q and Q = q1 + q2
If the company can practice third-degree price discrimation, calculate the following in each market:
(a) profit-maximizing price & quantity in