(This question will not be graded) Natflix is a streaming platform that is
looking for new consumers. There are two types of potential consumers for
Natflix: occasional watchers (O) and binge watchers (B), which are both equally
likely. It is known that Natflix’s profits are given by p – 0.5 m 2 ,
where p is the price charged for a subscription and m the
amount of movies available under that subscription.

The utility of each consumer is given by a i .m
- p ,where a O =4 and a B =5.

The reservation utility of both consumers is 2.

Select the correct option(s):

Question

(This question will not be graded) Natflix is a streaming platform that is
looking for new consumers. There are two types of potential consumers for
Natflix: occasional watchers (O) and binge watchers (B), which are both equally
likely. It is known that Natflix’s profits are given by  p  – 0.5 m 2 ,
where  p  is the price charged for a subscription and  m  the
amount of movies available under that subscription.

The utility of each consumer is given by  a i .m 
-  p  ,where  a O =4 and  a B =5.

The reservation utility of both consumers is 2.

Select the correct option(s):

Answer

If
the type of each consumer is observable, Natflix will offer one additional
movie to binge watchers than to occasional watchers.

Answer

If
the type of each consumer is not observable, an occasional watcher will get an
informational rent.

Answer

Natflix
will have to charge a lower price to binge watchers if types become
unobservable.

Answer

If
the type of each consumer is not observable, Natflix will charge a price of 22
for binge watchers

Crowdly

(This question will not be graded) Natflix is a streaming platform that is loo...

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