A monopolist’s marketing department has estimated that the p…
A monopolist’s marketing department has estimated that the price “P” it can charge for its product is decreasing in the quantity “Q” it wants to sell and increasing in the number of influencers “F” it pays off to promote its product. Specifically, P(Q,F) = 80 – 0.05 Q + 10 F1/2. The marginal cost of producing the good is $60. The cost of paying off influencers is constant at $1,000 per influencer. What is the optimal quantity it should produce? How many influencers should it pay off? What is the optimal price it should charge? What can you say about the Dorfman Steiner condition?