Problem: Consider the problem of a monopolist selling a non-durable good. The monopolist can sell its product in two periods, period 1 and period 2. Let pi and qi indicate the price charged and the quantity sold in period i = 1, 2. The demand in period 1 is given by q1 = 1 - p1, while the demand in period 2 is q2 = 1 - p2 + q1. The cost of producing q units is equal to q2/2.
How much will the monopolist produce in each period? At what price?