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Profits are maximized by equating the marginal revenue from the two consumers for the same marginal cost.
Indirect price discrimination arises when a seller cannot observe the buyers characteristics, and hence cannot determine the optimal price to charge the buyer relevant to their demand elasticity. The seller offers different kinds of services or differential pricing and lets the consumers choose as per their preference with hopes to segregate the high class consumers from the low. The pricing technique developed to induce the high class consumer to reveal themselves must satisfy the incentive compatibility constraint...
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