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A Manufacturer of flash drives has a profit function of P= t - q2where t is...

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Economics

A Manufacturer of flash drives has a profit function ofP= t - q2where t is the price chargedfor a flash drive and q2 is the cost of producing adrive whose capacity is q gigabytes. A consumer of type'x' has a utility function of u =xq-t, where 'x' takes on the value of 8 forH-type consumers or 6 for L-type consumers. There are 100 consumersof each type. A consumer gets zero utility if she does notbuy.

Calculate the optimal SEPARATING CONTRACT(qL,tL) and (qH,tH)under ASYMMETRIC INFORMATION

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3.8 Ratings (450 Votes)
If the consumer is L type contract L provides him utility 0 butif he chooses H contract then his    See Answer
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