A monopoly produces a good with a network externality at a constant marginal and average cost of c= $2. In the first period, its inverse demand curve is p=11-10. In the second period, its inverse demand curve is p=11-10 unless it sells at least Q = 8 units in the first period. If it meets or exceeds this target, then the demand curve rotates out by a (it sells a times as many units for any given price), so that its inverse demand curve is The monopoly knows that it can sell no output after the second period. The monopoly's objective is to maximize the sum of its profits over the two periods. For what values of a would the monopoly earn a higher two-period profit by setting a lower price in the first period? If a is (round your answer to two decimal places)

A monopoly produces a good with a network externality at a constant marginal and average cost of c= $2. In the first period, its inverse demand curve is p=11-10. In the second period, its inverse demand curve is p=11-10 unless it sells at least Q = 8 units in the first period. If it meets or exceeds this target, then the demand curve rotates out by a (it sells a times as many units for any given price), so that its inverse demand curve is The monopoly knows that it can sell no output after the second period. The monopoly's objective is to maximize the sum of its profits over the two periods. For what values of a would the monopoly earn a higher two-period profit by setting a lower price in the first period? If a is (round your answer to two decimal places)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.6P

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