You operate a Caribbean destination resort. You currently offer plans for a cruise departing from the resort and plans for a casino stay. It is expected that in 2021 there will be some return to more normal travel. You will re-launch your advertising for 2021 announcing that customers will be able to do both for one price. Your marginal cost per customer across both tours is $4800. Customer Preferences CruiseCasinoCustomer 1$7,000$3,000Customer 2$2,000$6,000 You know that about 21% of your customers decline cruises because of seasickness. At least 12% decline the casino trip saying they don't believe in gambling. As a rough approximation, you estimate that approximately 33% of your customers will never bundle. Given the preferences distribution, will mixed bundling increase profits? You must show the calculations that support your conclusion.

Mixed bundling is a strategy in which a customer is allowed to purchase the goods either together as…

Answered: You operate a Caribbean destination…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter23: Price-searcher Markets With Low Entry Barriers

Section: Chapter Questions

Problem 17CQ

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You operate a Caribbean destination resort. You currently offer plans for a cruise departing from the resort and plans for a casino stay. It is expected that in 2021 there will be some return to more normal travel. You will re-launch your advertising for 2021 announcing that customers will be able to do both for one price. Your marginal cost per customer across both tours is $4800.

Customer Preferences

	Cruise	Casino
Customer 1	$7,000	$3,000
Customer 2	$2,000	$6,000

You know that about 21% of your customers decline cruises because of seasickness. At least 12% decline the casino trip saying they don't believe in gambling. As a rough approximation, you estimate that approximately 33% of your customers will never bundle. Given the preferences distribution, will mixed bundling increase profits? You must show the calculations that support your conclusion.

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