Mixed Bundling Problem At the 8:10 café, 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 (that is she cannot price discriminate). Students with early classes Students without early classes Coffee 70 Banana 50 60 100 The MC of coffee is 10. The MC of a banana is 40. Is bundling more profitable than selling separately? HINT if you sell the bundle, can you make more by offering coffee separately? If so, what price should be charged for the bundle? (Show calculations)

Mixed Bundling Problem At the 8:10 café, 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 (that is she cannot price discriminate). Students with early classes Students without early classes Coffee 70 Banana 50 60 100 The MC of coffee is 10. The MC of a banana is 40. Is bundling more profitable than selling separately? HINT if you sell the bundle, can you make more by offering coffee separately? If so, what price should be charged for the bundle? (Show calculations)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Mixed Bundling Problem
At the 8:10 café, 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 (that is she cannot price discriminate).
Students with early classes Students without early classes
Coffee 70
Banana 50
60
100
The MC of coffee is 10. The MC of a banana is 40. Is bundling more profitable than selling separately? HINT:
if you sell the bundle, can you make more by offering coffee separately?
If so, what price should be charged for the bundle? (Show calculations)

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Step 2: Calculate the profit when sold separately

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Step 3: Calculate the profit when bundeled

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Step 4: Compare both cases

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