Question

A computer hardware firm sells both laptop computers and printers. Through the magic of focus​ groups, their pricing team determines that they have an equal number of three types of​ customers, and that these​ customers' reservation prices are as illustrated in the figure below. Laptop Printer Bundle Customer A ​$ 700 700 ​$ 100 100 ​$ 800 800 Customer B ​$ 1 comma 000 1,000 ​$ 150 150 ​$ 1 comma 150 1,150 Customer C ​$ 600 600 ​$ 50 50 ​$ 650 650

	Laptop	Printer	Bundle
Customer A	$700	$100	$800
Customer B	$1000	$150	$1150
Customer c	$600	$50	$650

Assume for simplicity the marginal cost of production for laptops and printers is zero. If the firm were to charge only individual prices​ (not use the bundle​ price), what prices should it set for its laptops and printers to maximize​ profit? Assuming for simplicity that the firm has only one customers of each​ type, how much does it earn in​ total? To maximize profit using individual​ prices, the firm should charge a price for laptops of p equals = 600 and a price for printers of p equals = 100. ​(Enter your responses as whole​ numbers.) In​ turn, profit is pi π equals =​$ 2000. After conducting a costly​ study, an outside consultant claims that the company could make more money from its customers if it sold laptops and printers together as a bundle instead of separately. Is the consultant​ right? Assume again that the firm has one customer of each type and that marginal cost is zero. How much does the firm earn in total from pure​ bundling? The​ profit-maximizing pure bundle price is ​$ 650 . In​ turn, profit is pi π equals =​$ 1950 1950 . Why does bundling pay or not​ pay? Bundling pay or does not pay because customer reservation values for laptops and printers in this example are positively or negatively correlated.

In this example does Bundling Pay or Does not pay and is it positively or negatively correlated?

Answer 1

: s6sU Pp : 150 1月 5o Ond I So 900 g 200 sire

n Cn 1600