a) If you sell EXCEL and WORD separately, what price for each maximizes your profit? What is your total profit? b) If you bundle EXCEL and WORD together, what bundle price maximizes your profit? What is your profit? c) What is the optimal mixed bundling strategy? Is there an advantage to mixed bundling in this example? Why or why not?
You produce WORD and EXCEL. You have two customers, A and B. Willingness to pay for each item for each person appears below.
A B
WORD 8 14
EXCEL 23 14
In parts (a)-(c) below, suppose marginal cost is zero for both WORD and EXCEL.
a) If you sell EXCEL and WORD separately, what price for each maximizes your profit? What is your total profit?
b) If you bundle EXCEL and WORD together, what bundle price maximizes your profit? What is your profit?
c) What is the optimal mixed bundling strategy? Is there an advantage to mixed bundling in this example? Why or why not?
d) Now suppose your MC has increased from zero to 10 for each unit of EXCEL and each unit of WORD. Repeat parts (a)-(c) with this change in costs.
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