Problem
Suppose a monopoly facing the sort of credibility problem sketched in section 9.5 decided to be generous to its customers and offer each one a "most favored customer" contract as outlined there. Create and analyze a formal model that supports some (or, if you can, all) of the intuitive assertions we made. You may ignore the time value of money, to keep the analysis relatively simple. You may wish to return to continue your analysis after you have completed part ill of the book.
In the next three problems, you are introduced to ways of modeling demand for differentiated goods and to the problem of a monopoly deciding how many "varieties" of a good to provide. We look at a particularly simple case of this problem; see Tirole (1988, chap. 2) for a much more complete discussion.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.