A group of 12 consumers are considering whether to connect to a new social network. Consumer 1 has an intrinsic value of $1 for hooking up to the…

Hello can someone help me answer this question? It is for the course pricing. Thank you

Q1. A group of 12 consumers are considering whether to connect to a new social network.Consumer 1 has an intrinsic value of $1 for hooking up to the network, consumer 2 has an intrinsic value of $2, consumer 3 has an intrinsic value of $3, and so on up to consumer 12.Each consumer’s willingness-to—pay (WTP) to connect to the network depends on the totalnumber of persons who are connected to it. The exact relationship is described as follows:for each 1, consumer i’s willingness-to-pay to connect to the network is itimes the totalnumber of persons connected. Thus if 5 people are connected to the network, consumer 1’swillingness-to—pay is $5, consumer 2’s willingness-to—pay is $10 and so on. a. (3 points) Assume that for any given number of people in the social network, consumerwith the highest willingness-to—pay will sign up first. Use a table to show the relationshipamong the total number of people in the network, the marginal consumer who joins thenetwork, and the willingness-to—pay for the marginal consumer. The table should havethree columns: (i) Total no. of consumers in the network, (ii) The intrinsic value of themarginal consumer, (iii) Willingness-to—pay of the marginal consumer. b. (5 points) Suppose the network has decided to subsidize consumers 1 and 2 (i.e., theconsumer with intrinsic value = 1, and consumer with intrinsic value = 2) to join thenetwork for free, and then set the price at $35. Assume that a consumer will not sign upfor the network unless his/her willingness-to—pay will be higher than the price he/shepays, as soon as he/she signs up. What will be the total number of consumers who willsign up the network? [Hint Create a table similar to part (a) and use it to help you answer the question] c. (5 points) Suppose the network has decided to subsidize consumers 11 and 12 (i.e., theconsumer with intrinsic value = 11, and consumer with intrinsic value = 12) to join thenetwork for free, and then set the price at $35. Assume that a consumer will not sign upfor the network unless his/her willingness-to—pay will be higher than the price he/shepays, as soon as he/she signs up. What will be the total number of consumers who willsign up the network? [Hint Create a table similar to part (a) and use it to help you answer the question] (1. (5 points) Suppose the network has decided to subsidize consumers 5 and 6 (i.e., theconsumer with intrinsic value = 5, and consumer with intrinsic value = 6) to join thenetwork for free, and then set the price at $35. Assume that a consumer will not sign upfor the network unless his/her willingness-to—pay will be higher than the price he/shepays, as soon as he/she signs up. What will be the total number of consumers who willsign up the network?

Join the Conversation

22 Comments

  1. You’re so interesting! I don’t think I’ve
    truly read through a single thing like this before. So great to find someone with genuine thoughts on this
    topic. Seriously.. many thanks for starting
    this up. This site is something that is required on the web, someone with a
    bit of originality!

  2. An impressive share! I have just forwarded this onto a friend who has been conducting a little research on this.
    And he actually ordered me lunch simply because I stumbled upon it for him…
    lol. So let me reword this…. Thanks for the meal!! But yeah,
    thanx for spending the time to talk about this matter here on your web site.

  3. 210059 798589I think your suggestion would be beneficial for me. I will let you know if its work for me too. Thank you for sharing this beautiful articles. thanks a whole lot 675236

  4. 45603 683261Someone essentially assist to make severely posts I may state. That is the very 1st time I frequented your site page and so far? I surprised with the analysis you produced to create this certain submit incredible. Magnificent task! 998243

  5. 922545 448719I discovered your blog internet site internet site on the search engines and check several of your early posts. Always sustain up the very good operate. I lately additional increase Rss to my MSN News Reader. Seeking for toward reading considerably a lot more on your part later on! 298206

Leave a comment

Your email address will not be published.