Question 1
a) Your company is in the business of offering high speed Internet Access along with other services like Web Hosting. You are the product manager who designs product and service plans to small and medium business in downtown. You realize that offering one product-price plan to all is not enough and that you can increase profits by offering smart product bundles. After conducting a small survey, you find out that some firms (totaling 20) are willing to pay $49.99/ per month for a reliable high speed Internet while others (another 20) can pay as much as $59.99. [Assume that consumer's willingness to pay - price = Consumer Surplus. Users always choose a product or product bundle that gives them higher Consumer Surplus].
I. Is there any way you can sell two different price plans to these businesses? Why? Why not? What are your profits?
II. You also find from your survey that firms who are willing to pay higher are also interested in web hosting and can pay another $20 for it. Now, can you design some product plans to increase your profits? What are those plans and what is the profit?
b) Suppose you are the regulator in charge who has authority over Internet services (although in reality such a position may not exist depending on your country). You decided to enhance the competition among the Internet Service Providers (ISP) and also wanted to allow new competitive ISPs to emerge. Describe at least two different competition models that you could propose. Explain briefly how your models could be applied to the current ISPs. Explain the pros and cons of your models.