Bill Gates, even though no longer a CEO of Microsoft, still cares about the profits of his company. Assume it costs Microsoft $1 per copy of a new WindowsXX, and the inverse demand for this revolutionary product takes the form P (Q) = 60 – 5Q. A. Assume the plan to chip people worked out perfectly and Bill Gates knows exactly the willingness to pay of all consumers. What would be the profit of Microsoft then? B. Assume instead that Microsoft is allowed to do block-pricing with 2 blocks. What happens to its profit? C. Finally, assume Microsoft was able to separate it's consumers into business owners with inverse demand P (Q) = 40 – Q and others with inverse demand P (Q) = 20 –- 4Q. What would be Microsoft's profit?

Bill Gates, even though no longer a CEO of Microsoft, still cares about the profits of his company. Assume it costs Microsoft $1 per copy of a new WindowsXX, and the inverse demand for this revolutionary product takes the form P (Q) = 60 – 5Q. A. Assume the plan to chip people worked out perfectly and Bill Gates knows exactly the willingness to pay of all consumers. What would be the profit of Microsoft then? B. Assume instead that Microsoft is allowed to do block-pricing with 2 blocks. What happens to its profit? C. Finally, assume Microsoft was able to separate it's consumers into business owners with inverse demand P (Q) = 40 – Q and others with inverse demand P (Q) = 20 –- 4Q. What would be Microsoft's profit?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.11P

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