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Price Strategy 1. Mixed Bundling 2. Price Separately 3. Bundle Only Pricing strategy Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy $ $ $ $ $ yields the highest profit for the café owner. $

Price Strategy 1. Mixed Bundling 2. Price Separately 3. Bundle Only Pricing strategy Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy $ $ $ $ $ yields the highest profit for the café owner. $

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Price Strategy 1. Mixed Bundling 2. Price Separately 3. Bundle Only Pricing strategy Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy $ $ $ $ $ yields the highest profit for the café owner. $ $
Transcribed Image Text:Price Strategy 1. Mixed Bundling 2. Price Separately 3. Bundle Only Pricing strategy Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy $ $ $ $ $ yields the highest profit for the café owner. $ $
6. Individual Problems 14-6 At a student 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 (i.e., she cannot price-discriminate). Coffee Banana Students with Early Classes Students without Early Classes 73 55 63 105 The marginal cost of coffee is 10 and the marginal cost of a banana is 40. The café owner is considering three pricing strategies: 1. Mixed bundling: Price bundle of coffee and a banana for 168, or just a coffee for 73. 2. Price separately: Offer coffee at 63, price a banana at 105. 3. Bundle only: Coffee and a banana for 128. 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 item or bundle. For simplicity, assume there is just one student with an early class, and one student without an early class.
Transcribed Image Text:6. Individual Problems 14-6 At a student 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 (i.e., she cannot price-discriminate). Coffee Banana Students with Early Classes Students without Early Classes 73 55 63 105 The marginal cost of coffee is 10 and the marginal cost of a banana is 40. The café owner is considering three pricing strategies: 1. Mixed bundling: Price bundle of coffee and a banana for 168, or just a coffee for 73. 2. Price separately: Offer coffee at 63, price a banana at 105. 3. Bundle only: Coffee and a banana for 128. 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 item or bundle. For simplicity, assume there is just one student with an early class, and one student without an early class.
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