A computer hardware firm sells both laptop computers and printers. Through the m

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 Customer A Customer B Customer C Laptop $800 $950 $600 Printer $100 $150 S50 Bundle $900 $1,100 $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 the firm should charge a price for laptops of and a price for printers of (Enter your responses as whole numbers)

Explanation / Answer

TO maximise the profit the store will charge $600 for laptops from all the three customers. In that case, his total profit will be $1800. If he charges more he will lose one customer which is buying the laptop only at $600 and his profit will come down.

To maximise his profit the store will charge $100 for the printer, then his total profit will be $200. Here, even after losing one customer he is making maximum profit. If he had charged $50 for the printer to get the third customer his profit would only be $150 which is less than $200.

Final Answer for laptops: $600

For printers: $100.

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