À firm that sells two goods (good 1 and good 2) has four potential customers with the reservation prices shown in the table below. For simplicity, assume the firm's production costs are zero. good 1 good 2 bundle consumer $12 $6 $18 $10 $14 $24 C $6 $18 $24 $1 $22 $23 Hint: You can adapt the supporting spreadsheet provided on Canvas to find the answers. a. Calculate the profit-maximizing separate prices and the resulting profit. b. Calculate the profit-maximizing pure bundle price and the resulting profit. c. Determine how the firm maximizes its profit by using mixed bundling. d. What is the best pricing strategy for this firm? Why? (optional) How would your answers change if the reservation prices in this example were positively correlated instead of negatively correlated?

À firm that sells two goods (good 1 and good 2) has four potential customers with the reservation prices shown in the table below. For simplicity, assume the firm's production costs are zero. good 1 good 2 bundle consumer $12 $6 $18 $10 $14 $24 C $6 $18 $24 $1 $22 $23 Hint: You can adapt the supporting spreadsheet provided on Canvas to find the answers. a. Calculate the profit-maximizing separate prices and the resulting profit. b. Calculate the profit-maximizing pure bundle price and the resulting profit. c. Determine how the firm maximizes its profit by using mixed bundling. d. What is the best pricing strategy for this firm? Why? (optional) How would your answers change if the reservation prices in this example were positively correlated instead of negatively correlated?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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