Answer Happy

Problem 3: You are a decision maker for a large a telecommunication company. You are in charge of developing a pricing strategy for data streaming services for the company. Market researchers have estimated the weekly demand for a typical customer to be (Q is a GB of data transfers): Q=20-4P = From your engineers, you are told that the variable costs of streaming data are given by: VC(Q)=$1.50 a. If you decide to offer the product for sale to all buyers at a single price, what price will you charge and how much will you sell to a typical customer? b. What profits per consumer will you earn under this pricing strategy? c. Now suppose you decide to use a simple block pricing strategy. What happens to revenues if you charge $4.50/GB for the first 2 GBs, $4.00/GB for the next 2 GBs, $3.25/GB for the next 3 GBs and $2.50/GB for the next block of 3 GBs? d. What profits per consumer will the firm earn under this pricing strategy? e. Compare the profits under the two pricing strategies. Comment on the comparison.