A distillery makes whisky, where its profits from production per bottle are given by T =p - y? where p is the price it charges per bottle and y is the number of years the bottle is aged. There are two types of whisky drinkers, connoisseurs (H type) and casuals (L type). H-type have utility uH (y, p) = 8y – p, while L-type have utility uL (y, p) = 2y- p. There are 10 consumers of each type, and each will buy at most one bottle. Each consumer's utility if she does not buy is 0. If a consumer is indifferent between buying two bottles, assume she will buy the more aged one (the one with higher y). If a consumer is indifferent between buying a bottle and not buying, assume she will buy. Bottles are characterised by (y, p). years of age and price. For each menu of offerings below, calculate the distillery's profit. (1,9) and (4, 24) (1, 2) and (4, 24) (1, 2) and (2, 24) Calculate the firm's profits when it chooses the optimal menu.

A distillery makes whisky, where its profits from production per bottle are given by T =p - y? where p is the price it charges per bottle and y is the number of years the bottle is aged. There are two types of whisky drinkers, connoisseurs (H type) and casuals (L type). H-type have utility uH (y, p) = 8y – p, while L-type have utility uL (y, p) = 2y- p. There are 10 consumers of each type, and each will buy at most one bottle. Each consumer's utility if she does not buy is 0. If a consumer is indifferent between buying two bottles, assume she will buy the more aged one (the one with higher y). If a consumer is indifferent between buying a bottle and not buying, assume she will buy. Bottles are characterised by (y, p). years of age and price. For each menu of offerings below, calculate the distillery's profit. (1,9) and (4, 24) (1, 2) and (4, 24) (1, 2) and (2, 24) Calculate the firm's profits when it chooses the optimal menu.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 4SQ

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