ECONOMICS 4139

Ottawa University

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Industrial Organization: Markets and Strategies Paul Belleáamme and Martin Peitz published by Cambridge University Press Part II. Market power

Industrial Organization: Markets and Strategies Paul Belleáamme and Martin Peitz published by Cambridge University Press Part II. Market power
Exam (elaborations) • 27 pages • 2022

Consider a monopolist who sells batteries. Each battery works for h hours and then needs to be replaced. Therefore, if a consumer buys q batteries, he gets H = qh hours of operation. Assume that the demand for batteries can be derived from the preferences of a representative consumer whose indirect utility function is v = u(H) pq, where p is the price of a battery. Suppose that u is strictly increasing and strictly concave. The cost of producing batteries is C(q) = qc(h), where c is stric...