Microhard offers a word-processing software (W) and a spreadsheet program (S). There are three user types: those who primarily want W, those who primarily want S, and those who want both. Their maximum values are given in the table below: User type of users Value of W Value of S W 20 $200 $120 30 $100 $250 Both 50 $400 for both W & S The marginal cost of providing software is $0; the marginal cost of tying is also $0. Assume that each user buys at most one unit of each software. (a) Suppose there is no bundling, i.e, both W and S are priced separately. What prices Pw and ps will Microhard charge so as to maximize its profits, a? (b) Suppose there is pure bundling, i.e., both software are sold in one package only. What price pws will Microhard charge and what will be its profits, nP#? (c) Šuppose there is mixed bundling, i.e., users can buy each software separately or buy a package containing both at a tied price. What prices Pw and ps charge and what will be its profits, a™ ? and pws will Microhard

Microhard offers a word-processing software (W) and a spreadsheet program (S). There are three user types: those who primarily want W, those who primarily want S, and those who want both. Their maximum values are given in the table below: User type of users Value of W Value of S W 20 $200 $120 30 $100 $250 Both 50 $400 for both W & S The marginal cost of providing software is $0; the marginal cost of tying is also $0. Assume that each user buys at most one unit of each software. (a) Suppose there is no bundling, i.e, both W and S are priced separately. What prices Pw and ps will Microhard charge so as to maximize its profits, a? (b) Suppose there is pure bundling, i.e., both software are sold in one package only. What price pws will Microhard charge and what will be its profits, nP#? (c) Šuppose there is mixed bundling, i.e., users can buy each software separately or buy a package containing both at a tied price. What prices Pw and ps charge and what will be its profits, a™ ? and pws will Microhard

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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