Let be the monopoly price and p" be the competitive price. Initially, there are many souvenir shops, each of which charges p (because consumers do not know the shops' prices), and buyers search costs are c. If the government pays for half of consumers' search costs, can there be a single price equilibrium at a price less than P Show that the patent we used to reject a single-price equilibrium at any price except the monopoly price did not depend on the size of the search cost Consider a deviant firm, where all other firms charge a single price (any single price) p where The price,p. below the monopoly price. P is not a single-price equilibrium because a deviant firm can profit, whereby consumers who stop at the deviant store do not search further, from raising da price above pas long as it raises its price by no more than Property format your expression using the tools in the palette Hover over tools to see keyboard shortcuts. Eg, a fraction can be created with the character)

Let be the monopoly price and p" be the competitive price. Initially, there are many souvenir shops, each of which charges p (because consumers do not know the shops' prices), and buyers search costs are c. If the government pays for half of consumers' search costs, can there be a single price equilibrium at a price less than P Show that the patent we used to reject a single-price equilibrium at any price except the monopoly price did not depend on the size of the search cost Consider a deviant firm, where all other firms charge a single price (any single price) p where The price,p. below the monopoly price. P is not a single-price equilibrium because a deviant firm can profit, whereby consumers who stop at the deviant store do not search further, from raising da price above pas long as it raises its price by no more than Property format your expression using the tools in the palette Hover over tools to see keyboard shortcuts. Eg, a fraction can be created with the character)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.8P

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You are a monopolist making a durable good, the widget. Some of your customers have started to sell their used widgets to others. Assume the used and new widgets are perfect substitutes, but with 2 used equivalent to one new widget. a.) what effect would an increase in cost for new widgets have on the price of new and used widgets? b.) You consider trying to get the used widgets market made illegal. If this were done perfectly, how would it affect your monopoly's price and profits? show this graphically and in words
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