You have been put in charge of pricing for a monopolist. Assume that the marginal cost is zero (0). It is known that there are two consumers. Consumer I has a demand of q^d = 6 - p. Consumer II has demand q^d = 12 - 2p. But which consumer is which is unknown. Draw each type of consumers' demand curve.
a. What is the combined demand (use a demand schedule)? What is the optimal single price, the number of calls made, the profits for the firm, and the consumer surplus of each type of person.
b. With the optimal single price, what fixed fee could you charge? (Hint: what fixed fee could you charge in addition, so that the low demand consumer would still buy the same amount?)
c. You tell your boss, "We can make more money by separating out the two types of users. The boss says, "No one would want to reveal that they have a higher demand." Show you can by using two different pricing options. Hint: use the offer in b. for the low demand consumers, and create an option that the high demand consumers would choose which generates more profit from them.
d. Explain why this plan works.