By how much will newspaper prices rise


A city has two newspapers. Demand for either paper depends on its own price and the price of its rival. Demand functions for papers A and B respectively, measured in tens of thousands of subscribers, are 21 - 2Pa + Pb and 21 + Pa 2Pb. The marginal cost of printing and distributing an extra paper just equals the extra advertising revenue from another reader, so each paper treats marginal costs as zero. Each paper maximizes its revenue assuming that the other's price is independent of its own price. If the papers enter a joint operating agreement where they set prices to maximize their total revenue, by how much will newspaper prices rise?

Request for Solution File

Ask an Expert for Answer!!
Microeconomics: By how much will newspaper prices rise
Reference No:- TGS061013

Expected delivery within 24 Hours