Question

Question 2 (10 marks) a. Describe what is meant by third degree price discrimination. Give one example of third degree price discrimination. What challenges might a firm face in implementing third degree price discrimination? [4 marks] b. Netflix decides to start selling two subscriptions, an action and a drama subscription. They have four customers, each of whose valuation is indicated in the table below: Ann Bob Charlie Dom Action 100 400 600 700 Drama 800 900 800 200 Assume the marginal cost of offering either subscription is zero. What are the optimal prices of each of the action and drama subscriptions if there is no bundling? [2 marks] If the action and drama subscriptions are sold only as a bundle, what is the optimal price of the bundle? [2 marks] If the action and drama subscriptions can optionally be purchased in a bundle, what are the optimal prices of each of the action subscription, drama subscription and bundle? [2 marks]

          Question 2 (10 marks)
a. Describe what is meant by third degree price discrimination. Give one example of
third degree price discrimination. What challenges might a firm face in implementing
third degree price discrimination? [4 marks]
b. Netflix decides to start selling two subscriptions, an action and a drama
subscription. They have four customers, each of whose valuation is indicated in the
table below:
Ann	Bob	Charlie	Dom
Action	100	400	600	700
Drama	800	900	800	200
Assume the marginal cost of offering either subscription is zero.
What are the optimal prices of each of the action and drama subscriptions if there
is no bundling? [2 marks]
If the action and drama subscriptions are sold only as a bundle, what is the optimal
price of the bundle? [2 marks]
If the action and drama subscriptions can optionally be purchased in a bundle,
what are the optimal prices of each of the action subscription, drama subscription
and bundle? [2 marks]

Question 2 (10 marks)
a. Describe what is meant by third degree price discrimination. Give one example of
third degree price discrimination. What challenges might a firm face in implementing
third degree price discrimination? [4 marks]
b. Netflix decides to start selling two subscriptions, an action and a drama
subscription. They have four customers, each of whose valuation is indicated in the
table below:
Ann Bob Charlie Dom
Action 100 400 600 700
Drama 800 900 800 200
Assume the marginal cost of offering either subscription is zero.
What are the optimal prices of each of the action and drama subscriptions if there
is no bundling? [2 marks]
If the action and drama subscriptions are sold only as a bundle, what is the optimal
price of the bundle? [2 marks]
If the action and drama subscriptions can optionally be purchased in a bundle,
what are the optimal prices of each of the action subscription, drama subscription
and bundle? [2 marks]

Added by Daniel A.

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