Economics Suppose Va is a person's willingness to pay for good A,Vb is a person's willingness to pay for good B. Va is uniformly distributed between 0 and 10 across the population, Vb is uniformly distributed between 0 and 15 across the population. There are only two products A and B. Each person buys at most one unit of A. There are altogether N persons in the population (N is a very large number). a) Suppose the company is only allowed to do component pricing. Find an expression for the percentages of population that buys A only, B only, and both. b) Calculate the optimal prices under component pricing. c) Calculate the optimal prices under pure bundling d) Calculate the average consumer surplus under component pricing and under pure bundling.

Economics Suppose Va is a person's willingness to pay for good A,Vb is a person's willingness to pay for good B. Va is uniformly distributed between 0 and 10 across the population, Vb is uniformly distributed between 0 and 15 across the population. There are only two products A and B. Each person buys at most one unit of A. There are altogether N persons in the population (N is a very large number). a) Suppose the company is only allowed to do component pricing. Find an expression for the percentages of population that buys A only, B only, and both. b) Calculate the optimal prices under component pricing. c) Calculate the optimal prices under pure bundling d) Calculate the average consumer surplus under component pricing and under pure bundling.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Economics
Suppose Va is a person's willingness to pay for
good A,Vb is a person's willingness to pay for good
B. Va is uniformly distributed between 0 and 10
across the population,Vb is uniformly distributed
between 0 and 15 across the population. There are
only two products A and B. Each person buys at
most one unit of A. There are altogether N persons
in the population (N is a very large number) .
a) Suppose the company is only allowed to do
component pricing. Find an expression for the
percentages of population that buys A only, B only,
and both.
b) Calculate the optimal prices under component
pricing.
c) Calculate the optimal prices under pure
bundling
d) Calculate the average consumer surplus under
component pricing and under pure bundling.

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Step 1: Define Average Consumer Surplus

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Step 2: a) Determine the expression of percentages

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Step 3: b) Determine Optimal Prices under Component Pricing:

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Step 4: c) Determine Optimal Price under Pure Bundling:

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Step 5: d) Determine Average Consumer Surplus under Component Pricing and Bundling:

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