two-part tariff

All consumers have identical demand for a product. Each person's demand curve is P= 30-2Q. The marginal cost of production is $2. Devise a two-part tariff that will exhaust all consumer surplus.

Evaluate: Xerox makes 75 percent of its profits selling toner and 25 percent of its profits selling machines.

Xerox sells both copiers and a toner for their copiers. While customers are not required to buy Xerox toner, most do because specified machines use toner only for that machine. The Xerox toner and machines are closely designed and non-Xerox toner in Xerox machines produces inferior copies. Evaluate the statement: "Xerox makes 75 percent of its profits selling toner and 25 percent of its profits selling machines."

pricing

Some tennis clubs charge an up-front fee to join and a per-hour charge for court time. Others do not charge a membership fee but charge a higher per-hour fee for court time. Consider clubs in two different locations. One is located in a suburban area where the residents tend to be of similar age, income, and occupation. Which of the locations is more likely to charge a membership fee? Explain.

price discrimination/pricing policies

Consider three firms: a shoe store at the mall, an automobile dealership, and a house painting firm. a. Which firm would you expect to engage in the most price discrimination? Why? b. How has the Internet changed the pricing policies of these businesses?

Game theory/competition vs. coordination

Suppose Microsoft can produce a new sophisticated software product. However, it wants to do so only if Intel produces high-speed microprocessors. Otherwise, the software will not sell. Intel, in turn, wants to produce high-speed microprocessors only if there is popular software on the market that requires high-speed processing. Is this a game of competition or coordination? What is the equilibrium?