Explain how the long-run might differ from the short

Question

1. The reservation prices of three classes of demanders of Cable Channels Lifetime, Disney, and ESPN are given below:

Class                           Lifetime           Disney     ESPN          Bundle                       

30 Year Old Males      $8                    $3              $22           

30 Year Old Females  $18                  $8              $13

3 to 7 year olds            $3                    $20            $5

It cost $6 to produce and distribute each Channel. The cable company can sell each separately; sell them as a bundle, or both.

a. What bundling pricing strategy would you recommend?

b. How much more profitable is the best strategy compared to the next best?

2. There are two types of people who frequent Roosevelt's: Over 21 Students(S) and Over 21 Student Wannabees (W). Each Student has a demand for beverages of P = 8 - Q_S, where Q_Sis the quantity of beverages demanded if the price of a beverage is P. Each Wannabee has a demand for beverages of P = 8 - 2Q_W where Q_Wis the quantity of beverages demanded if the price of a beverage is P. The marginal cost of serving a beverage is a constant $2. For simplicity, assume there is one demander of each type. Roosevelt's must (by law) charge all customers the same admission charge and the same per beverage charge. Beverages do not have to be sold in integer amounts, and prices do not have to be in integer amounts. 

Option 1. Use just a beverage charge per beverage ordered or 

Option 2. Use an admission charge (a fee to enter the establishment) and a beverage charge per beverage ordered

a. Under option 1, what is the profit- maximizing price per beverage?

b. Under option 2, what is the profit- maximizing two- part tariff?

c. What is Roosevelt's profit under Roosevelt's best choice?

3.  Suppose the payoff matrix for pricing cloud products by Microsoft and Amazon are given below:

			Amazon
		Lower Price	Same Price	Higher Price
	Lower Price	-2,-2	6,  0	8, -4
Microsoft	Same Price	0, 6	3, 3	5,-3
	Higher Price	-4, 8	-3, 5	11, 11

1. Is there a Nash Equilibrium here? Explain what each competitor is likely to do.
2. Is this an example of the prisoner's dilemma?
3. Explain how the long-run might differ from the short run. In you answer, assume that they also compete with Cisco, IBM, and Google.