Question 22 A physical DVD disc is a rival good, whereas a streaming video that can be used by multiple paying users is nonrival.
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Step 1: A rival good is a type of good that can only be used by one person at a time, and its consumption by one person prevents its consumption by another. Show more…
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Revisit the Netflix membership fee issue discussed in Problem 20. Suppose you learn that there are actually two types of Netflix user: intensive users and casual users. Intensive users comprise $20 \%$ of all viewers and have inverse demand: $P_{I}=0.6-0.01 Q_{I}$ . Where $Q$ is measured in hours of streaming time. Casual users comprise $80 \%$ of all viewers and have inverse demand: $$P_{C}=0.4-0.02 Q_{C}$$ You are tasked with choosing the optimal monthly membership fee. Netflix remains committed to allowing unlimited streaming once this fee has been paid. (You may assume Netflix can provide an hour of streaming at essentially zero marginal cost.) a. What fee will you charge? b. Would your answer change if intensive users comprised $25 \%$ of all viewers?
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