Question

B Problem 6: Suppose you are a pricing analyst for MegaDat Corporation. Two types of clients use your software product. Type A’s inverse demand for your software is P = 100 – 6Q, where Q represents users and P is in dollars per user. Type B’s inverse demand is P = 60 – 3.5Q . Assume the marginal cost of supplying software is $13 per user. Answer the following questions: If you can determine which buyer is which before a purchase is made, what price will you charge each type? Suppose you cannot tell which type of buyer each client is. Suggest a possible way to use quantity discounts to have buyers self-select into the pricing scheme set up for them.

Answer 1