Suppose there are two customers (or types of customers). The table below shows the willingness of each customer to pay for each service or a bundle. Assume the marginal and average costs ofselling one more service to a customer are virtually zero (such that the firm attempts to maximize revenue).Explain why the firm does not use mixed bundling. Throughout, if consumers are indifferent between purchases, then assume they make the purchase that benefits the firm.First, let consumer valuations be positvely correlated.TelevisionBundleInternet$150$130$280Consumer 1Consumer 2Profit-maximizing price$140$55$195$140130$195Profit from selling the goods at separate prices isseparate=$.profit from selling the goods at the bundled price isAbundled = $.and profit from selling the goods at the profit-maximizing separate prices and at the profit-maximizing bundled price ismixed=$. (Enter numeric responses using integers.)Now consider an example where consumer valuations are negatively correlated.Why doesn't the firm use mixed bundling?InternetTelevision$150$80Consumer 1Consumer 2Profit-maximizing price$80$150$80$80Profit from selling the goods at separate prices isseparate = $.Bundle$230$230$230

1. 1) profit from selling at separate prices = 410 = (140*2) + (130*1) = 280+130 = 410

Suppose mers (or types the willingness to pay vice or a bur Assume the selling one more service to a customer are virtually zero (such that the firm attempts to maximize revenue). Explain why the firm does not use mixed bundling. Throughout, if consumers are indifferent between purchases, then assume they make the purchase that benefits the firm. First, let consumer valuations be positvely correlated. Television Bundle Internet $150 $140 $130 Consumer 1 Consumer 2 Profit-maximizing price $280 $55 $195 $140 130 $195 Profit from selling the goods at separate prices is separate = $. profit from selling the goods at the bundled price is Abundled = $. and profit from selling the goods at the profit-maximizing separate prices and at the profit-maximizing bundled price is mixed =$. (Enter numeric responses using integers.) and average costs

Suppose mers (or types the willingness to pay vice or a bur Assume the selling one more service to a customer are virtually zero (such that the firm attempts to maximize revenue). Explain why the firm does not use mixed bundling. Throughout, if consumers are indifferent between purchases, then assume they make the purchase that benefits the firm. First, let consumer valuations be positvely correlated. Television Bundle Internet $150 $140 $130 Consumer 1 Consumer 2 Profit-maximizing price $280 $55 $195 $140 130 $195 Profit from selling the goods at separate prices is separate = $. profit from selling the goods at the bundled price is Abundled = $. and profit from selling the goods at the profit-maximizing separate prices and at the profit-maximizing bundled price is mixed =$. (Enter numeric responses using integers.) and average costs

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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