F3. 8. Individual Problems 14-6At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the twotypes of students because many students without early classes arrive early anyway (i.e., she cannot price-discriminate).CoffeeBananaStudents with Early Classes Students without Early Classes56664797The 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 66.2. Price separately: Offer coffee at 56, price a banana at 97.3. 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 itemor bundle.For simplicity, assume there is just one student with an early class, and one student without an early class.Price Stra 11. Mixed Bu2. Price Se3. BundlePricing strategy23Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy$SSyields the highest profit for the café owner.SS

The identification of a possible product attribute that is associated with the value is necessary…

Price Str 1 1. Mixed By 2 2. Price S 3. Bundle Pricing strategy 3 Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy S yields the highest profit for the café owner.

Price Str 1 1. Mixed By 2 2. Price S 3. Bundle Pricing strategy 3 Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy S yields the highest profit for the café owner.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 6PA

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Question

F3.

8. Individual Problems 14-6
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
56
66
47
97
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 66.
2. Price separately: Offer coffee at 56, price a banana at 97.
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 Stra 1
1. Mixed Bu
2. Price Se
3. Bundle
Pricing strategy
2
3
Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy
$
S
S
yields the highest profit for the café owner.
S
S

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