A firm wants to offer a quantity discount in order to price-discriminate between

Question

A firm wants to offer a quantity discount in order to price-discriminate between buyers who are relatively uninterested in the product and buyers who are obsessively interested in it. The uninterested customers have demand of QU = 30 – 0.5P. The package offered to them contains 10 units of the good at a price of $40 each. Which of the following packages designed for the obsessed customers are incentive compatible? A. 60 units at a price of $10 each B. 40 units at a price of $10 each C.60 units at a price of $20 each D. 40 units at a price of $20 each

Explanation / Answer

A & B both are desiged for thr obsessed customer who get per unit price -$10 for bulk unit of 60 & 40 while others get similar bulk unit for $20 each.

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