Economics 5. Individual Problems 14-6At a student café, there are equal numbers of two types of customers with the following values. The cafe owner cannot distinguish between the twotypes of students because many students without early classes arrive early anyway (Le, she cannot price-discriminate).CoffeeBananaStudents with Early Classes Students without Early Classes3697co47The marginal cost of coffee is 10 and the marginal cost of a banana is 40.The cafe owner is considering three pricing strategies:1. Mixed bundling: Price bundle of coffee and a banana for 153, or just a coffee for 55.2. Price separately: Offer coffee at 56, price a banana at 97.3. Bundle only: Coffee and a banana for 113. Do not offer goods separately.Assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the itemor bundle.Price Strategy1. Mixed Bundling2. Price Separately3. Bundle OnlyFor simplicity, assume there is just one student with an early class, and one student without an early class.Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing StrategyPricing strategy yields the highest profit for the café owner.

Indirect price discrimination requires identifying some potential product feature that is correlated…

At a student cafe, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (Le, she cannot price-discriminate). Coffee Banana Students with Early Classes Students without Early Classes co 36 97 The marginal cost of coffee is 10 and the marginal cost of a banana is 40. The can owner is considering three pricing strategi 1. Mixed bunding: Price bundle of coffee and a banana for 153, or just a coffee for 06. 2. Price separately: Offer coffee at 56, price a banana at 97. 3. Bundle only: Coffee and a banana for 113. Do not offer goods separately. Assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the tem or bundle. For simplicity, assume there is just one student with an early class, and one student without an early class. Price Strategy 1. Mixed Bundling 2. Price Separately 3. Bundle Only Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy 000