Consider a firm that produces two goods of independent demand and zero marginal cost. The reservation prices of the consumers are:
Consumers
Good 1
Good 2
A
40
150
B
40
120
C
100
70
D
60
30
Determine which strategy maximizes the profit for the company considering:
(a) selling the goods separately,
(b) pure bundling, and
(c) mixed bundling.
Show your calculations to support your analysis.
Consider a firm that produces two goods of independent demand and zero marginal cost. The reservation prices of the consumers are:
| Consumers | Good 1 | Good 2 |
|---|---|---|
| A | 40 | 150 |
| B | 40 | 120 |
| C | 100 | 70 |
| D | 60 | 30 |
Determine which strategy maximizes the profit for the company considering:
(a) selling the goods separately,
(b) pure bundling, and
(c) mixed bundling.
Show your calculations to support your analysis.
Related textbook solutions
Related questions
Scenario Bundling.1 :
Konon Company produces both digital cameras and photo printers. The marginal cost for a digital camera is 120 and the marginal cost for a photo printer is 80. There are four types of customers for Konon's digital camera and photo printers and their reservation prices are given in the table below.
|
Reservation |
Camera |
Printer |
|
A |
200 |
100 |
|
B |
150 |
150 |
|
C |
210 |
20 |
|
D |
50 |
180 |
The possible pricing strategies are listed in the table below.
|
Prices |
Camera |
Printer |
Bundle |
|
Separated Prices |
150 |
150 |
-- |
|
Pure Bundling |
-- |
-- |
280 |
|
Mixed Bundling |
200 |
150 |
300 |
You can assume each consumer only needs to buy 1 camera and 1 printer and they will purchase a product as long as the consumer surplus from purchasing the product is non-negative.
Refer to Scenario Bundling.1. Assuming there is only one customer of each type, what is the total producer surplus from pricing separately for Konon? We assume that if a consumer's willingness to pay equals the price, the consumer will purchase the product.
A. 150$
b. 350$
c. 120$
d. 230$
Scenario Bundling 1 :
Konon Company produces both digital camera and photo printers. The marginal cost for a digital camera is 120 and the marginal cost for a photo printer is 80. There are four types of customers for Konon's digital camera and photo printers and their reservation prices are given in the table below.
|
Reservation |
Camera |
Printer |
|
A |
200 |
100 |
|
B |
150 |
150 |
|
C |
210 |
20 |
|
D |
50 |
180 |
The possible pricing strategies are listed in the table below.
|
Prices |
Camera |
Printer |
Bundle |
|
Seperated Prices |
140 |
100 |
-- |
|
Pure Bundling |
-- |
-- |
230 |
|
Mixed Bundling |
200 |
150 |
300 |
You can assume each consumer only need to buy 1 camera and 1 printer and they will purchase a product as long as the consumer surplus from purchasing the product is non-negative.
Refer to Scenario Bundling 1. Assuming there is only one customer of each type, which customer will only purchase a CAMERA if MIXED bundling is offered by Konon?
Hint: You need to figure out the purchase decision for each customer. Given the mixed bundling pricing, what will A buy, what will B buy, what will C buy and what will D buy? You need to perform the analysis in order to reach the correct answer.
| A. |
Both A and B |
|
| B. |
Only A. |
|
| C. |
Only C. |
|
| D. |
Both C and D. |
