Your firm has a monopoly over of two products, Good 1 and Good 2. Both products are produced at a constant marginal cost of $25. You face four consumers (or groups of consumers) with the following reservation prices: (Image)Suppose that you have three alternative pricing strategies: i) individual pricing, ii) pure bundling, and iii) mixed bundling. For each strategy, determine the optimal prices to be charged, which consumer buys which product and the resulting profit. Which pricing strategy would yield the largest profit? Consumer B C D Good 1 (S/unit) 15 40 70 85 Good 2 (S/unit) 90 45 30 20

Your firm has a monopoly over of two products, Good 1 and Good 2. Both products are produced at a constant marginal cost of $25. You face four consumers (or groups of consumers) with the following reservation prices: (Image)Suppose that you have three alternative pricing strategies: i) individual pricing, ii) pure bundling, and iii) mixed bundling. For each strategy, determine the optimal prices to be charged, which consumer buys which product and the resulting profit. Which pricing strategy would yield the largest profit? Consumer B C D Good 1 (S/unit) 15 40 70 85 Good 2 (S/unit) 90 45 30 20

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Your firm has a monopoly over of two products, Good 1 and Good 2. Both products are produced at a
constant marginal cost of $25. You face four consumers (or groups of consumers) with the following
reservation prices: (Image)Suppose that you have three alternative pricing strategies: i) individual pricing, ii)
pure bundling, and iii) mixed bundling. For each strategy, determine the optimal prices to be charged,
which consumer buys which product and the resulting profit. Which pricing strategy would yield the largest
profit?
Consumer
B
C
D
Good 1 (S/unit)
15
40
70
85
Good 2 (S/unit)
90
45
30
20

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