# Q1.1-1.3 thanks 1 Bundling Suppose that a firm sells two different goods, A and B, to...

###### Question:

Q1.1-1.3 thanks

1 Bundling Suppose that a firm sells two different goods, A and B, to two different potential customers (i.e., consumer 1 and consumer 2). The firm has a marginal cost of zero dollars per unit of each good. Each customer buys at most one unit of either good, depending on whether the price exceeds or is less than the consumer's valuation. The table below shows the maximum willingness to pay for each consumer and good: Maximum Willingness to Pay Product A Product B Both Products $8.4$18.9 $27.3$9 $23$32 Consumer 1 Consumer 2 1.1 (10 points) What would be the optimal prices charged by the firm (i.e., PA and Pb) and the total revenue raised by the firm if it offered the two products separately (i.e., uniform pricing)? Explain.
1.2 (10 points) What would be the optimal price of a (pure) bundle and the total revenue raised by a bundling strategy? Explain. 1.3 (10 points) Comparing the total revenue raised by the firm under the two options (i.e., questions 1.1 and 1.2), is it bundling a more profitable strategy than marketing the two products separately? Explain why or why not.

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