After graduation you start an internet based firm that allows people to buy and sell books online Based on your market research you believe there
After graduation you start an internet based firm that allows people to buy and sell books online Based on
After graduation you start an internet based firm that allows people to buy and
an internet based firm that allows people to buy and sell books online Based on your market research you believe there
After graduation you start an internet based firm that allows people to
buy and sell books online Based on your market research you believe there
After graduation you start an internet based firm that
After graduation you start
After graduation, you start an internet-based firm that allows people to buy and sell books online. Based on your market research, you believe there...

Category: General
Words: 825
Amount: $25
Writer: 1

Paper instructions

After graduation, you start an internet-based firm that allows people to buy and sell books online. Based on your market research, you believe there are two basic types of customers. The first type is the casual readers who have relatively low willingness-to-pay for your services, and their demand is given by Q1 = 60 - 20P where Q1 is the number of books traded and P is the price you charge per book traded. The second type of customers are the avid readers who have relatively high willingness-to-pay for your services, and their demand is given by Q2 = 150 - 50P. The marginal cost of your online service is $1 per book traded. Assume that there are 100 readers of each type (i.e. 100 casual readers and 100 avid readers). 1. What would be the profit maximising two-part tariff strategy if you want only 'avid readers' to use your service? Calculate profit from selling your service to avid readers (assuming fixed cost of production is zero). 2. A friend tells you that you could make greater profits by servicing both types of readers. If you could charge casual and avid readers different joining/lump sum fees, what would be the optimal two-part tariff strategy for your service? What would be your total profit in this case (assuming fixed cost is zero)? 3. Suppose the law prohibits charging different types of customers different joining/lump sum fees. In this case, what would be the optimal two-part tariff strategy? Please calculate total profit (assuming fixed cost is zero).

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