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Personal consumption expenditure (PCE) is the primary measure of consumer spending on goods and services in the U.S. economy. It accounts for about two-thirds of domestic final spending, and thus it is the primary engine that drives future economic growth. PCE shows how much of the income earned by households is being spent on current consumption as ...


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In the typical textbook treatment of the two-part tariff model, income effect is ignored/assumed to be negligible. Goldman, Leland, and Sibley (1984) provided detailed comparison of optimal nonlinear pricing strategies (of which two-part tariff is a special case) with and without income effect. Their conclusion is When [income effects] are absent, the aim ...


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A monopolist maximizes profit. For me, it is usually easier to do this in the quantity space. So you rearange the demand and maximize $$\max_{Q_p,Q_r} \quad P_p(Q_p)Q_p + P_r(Q_r)Q_r - TC(Q_p+Q_r)$$ $$\max_{Q_p,Q_r} \quad (Q_p-10)Q_p + (28-2Q_r)Q_r - 5-2(Q_r+Q_p) -\frac{(Q_r+Q_p)^2}{8}$$ The FOC gives you two equations with two unknowns, $Q_r$ and $Q_p$, ...


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Broadly speaking endogeneity means that something some variable is determined within model as opposed to outside it. More narrowly in econometrics it means correlated with the error term (Wooldridge, (2009). Introductory Econometrics: 4ed. p. 88). These meanings are related since one will often lead to the another. In this paper they actually use it in both ...


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Nudge: Read the paper On Hotelling's "Stability in Competition" by d'Aspremont, Gabszewicz and Thisse.


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The previous +1 answer gives the correct economic mechanism but let me give you some case specific answer here. First of all there actually already is another drug that targets the same disease called Spinraza (see here) with cost of \$750,000 for the first year and then \$350,000 per year after that, so about \$4 million a decade. Assuming people with this ...


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It could work (it would depend on model parameters) if you would assume that it is impossible for firm to enter the market once firm exists. This is actually quite complex and long problem so I will provide only partial solution. This would be a sequential Bertrand competition problem (since you assume that firms only can compete on prices). Here in first ...


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In typical textbook two-part tariff there won't be an income effect because either demand will be just assumed to be given by some function or even if there is a utility function it won't feature budget constraint (e.g. see examples of such simple problems in Belleflamme and Peitz, Industrial Organization: Markets and Strategies pp 227-234). In such cases ...


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