Suppose That All Economics Professors Are Identical

Suppose that all economics professors are identical. They all derive $600 worth of utility from owning a full working copy of the current year’s version of Stata or $200 worth of utility from owning a student version with some features disabled. Students don’t care at all about the extra features of the full version. At any price p for the student version, student demand at MIT is 300 – 2p units per year. Assume that Stata has no marginal cost of selling its software.

Demand function is defined by DD=300-2pIf demand is 40, then Price for student version will be 40=300-2p, or p=130In this case the final version which is priced 3 times more than the student…

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