How is it logically possible for a monopolist to get different consumers to purchase different bundles on a menu (such as different sizes of coffee cups), and thereby achieve a form of price discrimination, even if the firm cannot observe the consumers' valuations directly?
a. Different types of consumers have different tradeoffs between money and amounts of the good.
b. The monopolist can use a market-separation strategy.
c. Social norms are powerful deterrents to lying about one's type.
d. This is impossible: if one bundle is preferred by one type, logically it will be preferred by all.
Question 2
A monopoly coffee shop is deciding on a menu of different cup sizes to sell to a population of consumers, some of whom are high demanders and some low demanders. How would the optimal menu differ depending on whether the consumers can be observably separated into the different types or not?
a. The menu is unaffected by type observability.
b. If types aren't observable, the large cup size should be increased to separate the high demander.
c. If types aren't observable, the small cup size should be increased to make it more attractive to low demanders.
d. If types aren't observable, the small cup size should be reduced to make it less attractive to high demanders.
This painting depicts New Orleans in 1803, when the city was acquired—along with much of the modern
Louisiana Purchase
Sample purchase order form.
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