Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 21

ANALYZING MANAGERIAL DECISIONS: Cell Phone Pricing
You are a pricing manager for a cell phone company. You have two types of customers with different demand curves for your service. The demand curves for an individual customer from each group for hours of talk time per month are
Type A customer: P = 10 - 2 Q
Type B customer: P = 10 - 2 Q
Your marginal cost for providing hours of phone service is zero (all your costs are fixed). There are 1,000 customers of each type.
You know the demand curves for the two types of customers. However, it is impossible for you to identify when a person purchases a plan whether the customer is from one group or the other.
What happens if you increase the monthly fee for the plan designed for the Type B customers Explain.