Microsoft Word – Problem Set on Firm Interactions .

b)  Now suppose you can perfectly price discriminate between normal users and power users, i.e., you can choose one price at which you will sell to power users and one price at which you will sell to normal users. What price will you set for each set of consumers? What are your expected profits, and why are they now higher? Why did you set a price of 0 for the power users? (20 points)