S S S S S t 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 (.e., she cannot price - discriminate). Students with Early Classes Students without Early Classes Coffee 68 58 Banana 45 95 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 153, or just a coffee for 68. 2. Price separately: Offer coffee at 58, price a banana at 95. 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 item or bundle. For simplicity, assume there is just one student with an early class, and one student without an early class. Price Strategy Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy 1. Mixed Bundling $ S $ 2. Price Separately 3. Bundle Only $ Pricing strategy yields the highest profit for the café owner.
S S S S S t 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 (.e., she cannot price - discriminate). Students with Early Classes Students without Early Classes Coffee 68 58 Banana 45 95 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 153, or just a coffee for 68. 2. Price separately: Offer coffee at 58, price a banana at 95. 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 item or bundle. For simplicity, assume there is just one student with an early class, and one student without an early class. Price Strategy Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy 1. Mixed Bundling $ S $ 2. Price Separately 3. Bundle Only $ Pricing strategy yields the highest profit for the café owner.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter10: Monopolistic Competition And Oligopoly
Section: Chapter Questions
Problem 10RQ: Is a monopolistically competitive firm productively efficient? Is it allocatively efficient? Why or...
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not use ai please
Transcribed Image Text:S
S
S
S
S
t 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 (.e., she cannot price - discriminate).
Students with Early Classes
Students without Early Classes
Coffee 68 58
Banana 45 95
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 153, or just a coffee for 68.
2. Price separately: Offer coffee at 58, price a banana at 95.
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 item or
bundle.
For simplicity, assume there is just one student with an early class, and one student without an early class.
Price Strategy
Revenue from Pricing Strategy
Cost from Pricing Strategy
Profit from Pricing Strategy
1. Mixed Bundling
$
S
$
2. Price Separately
3. Bundle Only
$
Pricing strategy yields the highest profit for the café owner.
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