A monopolist sells to two markets. The demand curve for the monopolist’s product is x_1 = a_1 - b_1 p_1 in market 1 and x_2 =a_2 - b_2 p_2 in market 2, where x_1 and x_2 are the quantities sold in each market, and p_1 and p_2 are the prices charged in each market. The monopolist has zero marginal costs. Note that although the monopolist can charge different prices in the two markets, it must sell all the units within a market at the same price. a) Under what conditions on parameters ( a_1 , a_2 , b_1 , b_2 ) will the monopolist optimally choose not to price discriminate? (Assume interior solutions). (5 marks)
