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 ypes 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 67 46 57 96 he marginal cost of coffee is 5 and the marginal cost of a banana is 20. he café owner is considering three pricing strategies: 1. Mixed bundling: Price bundle of coffee and a banana for 153, or just a coffee for 67. 2. Price separately: Offer coffee at 57, price a banana at 96. 3. Bundle only: Coffee and a banana for 113. Do not offer goods separately. ssume 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 r bundle. or simplicity, assume there is just one student with an early class, and one student without an early class.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

Economic subject ''

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
67
46
57
96
The marginal cost of coffee is 5 and the marginal cost of a banana is 20.
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 67.
2. Price separately: Offer coffee at 57, price a banana at 96.
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.
Transcribed Image Text: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 67 46 57 96 The marginal cost of coffee is 5 and the marginal cost of a banana is 20. 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 67. 2. Price separately: Offer coffee at 57, price a banana at 96. 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
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. $ $ $ $ $ $
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Public Policy
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education