Question

6. 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). Students with Early Classes Students without Early Classes 56 101 Coffee Banana 51 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 157, or just a coffee for 66 2. Price separately: Offer coffee at 56, price a banana at 101 3. Bundle only: Coffee and a banana for 117. 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 studentwll 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 Strategy 1. Mixed Bundling 2. Price Separately 3. Bundle Only Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy Pricing strategyY yields the highest profit for the café owner