problem set need to be finish


University of California - Davis

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there are few problem need to be finish and follow the step to provide the answer the du time is next Tuesday 10:40 am

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ECN121B – Industrial Organization II Prof. Muehlegger page 1 of 2 PROBLEM SET 2 Due at the start of class, January 19th Instructions: Group Work: I encourage all of you to work on the problem set in groups, but each member of the group must write up his or her own solutions. Problem sets that are verbatim copies will receive a zero. When submitting your problem set your problem set in make sure that you hand it in: 1. Stapled 2. With your name at the top 3. Including a list of all of the people with whom you worked Question: This question will require a bit of data analysis. You can find the data for the problem set as a comma delimited csv file (ps1_data.csv) or as a STATA data file (ps1_data.dta) on Canvas. You work for a company that sells a product to business customers and non-business (leisure) customers. The company conducts a marketing / strategy exercise, testing different prices in an attempt to map out the demand curves for the two sets of customers. Your job is to take the output of the price test and convert it into profit maximizing prices / quantities. 1. 2. Load the data into either Google Sheets, Excel or the program of your choice. Each file includes the following variables: Price, Q_business (quantity purchased by business customers), Q_leisure (quantity purchased by leisure customers). • How many observations are there in the dataset? • What are the minimum, maximum and average prices? • What are the minimum, maximum and average quantities purchased by the business and leisure customers? Estimate the demand curves for business and leisure customers. Transform each into an inverse demand curve. (Note: after estimating the demand curve, you should feel free to round the slope to the ones-digit and the intercept to the hundreds-digit). Although you should feel free to use any program to solve the problem set, STATA (in the computer labs) is well equipped to run regressions if you are comfortable with it. As a reminder, the relevant code to run a regression of variable Y on variable X with robust standard errors is: regress y x, robust . ECN121B – Industrial Organization II Prof. Muehlegger page 2 of 2 Alternatively, Google Sheets provides a way to graph a scatter plot, plot the line of best fit and retrieve the equation for the line. You can find a video that shows how here: 3. Assume that the firm’s MC = 30. What would be the optimal prices to set to each group if the firm could price discriminate between business and leisure customers? How much profit does the firm generate from third degree price discrimination? 4. How much additional profit could the firm generate from business customers if could perfectly price discriminate? How much would the firm sell? 5. Describe two reasons why a firm might not be able to engage in third-degree price discrimination. 6. Suppose that the firm cannot price discriminate? What is single price will maximize the firm’s profits across both sets of customers? What are firm profits? 7. True or False and then Explain: Firm profits are always higher if the firm can engage in third degree price discrimination than if it has to charge different groups the same price. ...
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