2.- You are a monopolist with 15 potential buyers for the two video games you se

Question

2.- You are a monopolist with 15 potential buyers for the two video games you sell, VG1 and VG2. You can produce these games at no cost. (You simply make copies.) There are 3 different types of clients: type A (3 of them), type B (5 of them) and type C (7 of them). The types' willingness to pay for each of the games is given in the following table each client would buy at most one unit of each of the games): VG1 VG2 Type A Type B Type C 10 15 14 10 (a) If you can only set (linear) prices for each of the two games, what prices would you select? (b) Can you do better with two part tariffs? (c) Can you do better by selling ONLY the package with the two games? What would then be the price of the package (bundle) that you would set?

Explanation / Answer

Ans a)- As we can see from table that for Type A VG1- the demand is 3x, at Type B VG1 demand is 2x and TYPE C VG1, demand is 2x so applicable pricing will be Type A- $3, Type B-$2, Type C-$2

Type A VG2 the demand is 5x, at Type B- VG2 demand is 1x and Type C VG2 demand is 1.5x. so applicable pricing will ne Type A-$3, Type B- $1 and Type C- $1.5

I will be selecting the price for the first VG1

Ans b) Two parts tariff can also be exercised here, only thing is to balance the sales of VG1 and VG2 respectively.

What can be done to sell Type A 2 of VG1 and 1 of VG2, TYPE B- 3 of VG1 and 2 of VG2 and Type c 5 of VG1 and 2 of VG2.

Ans C) Yes it can done good by selling the package of two good, but as the pricing of selling one VG1 is on a higher side as demand is higher, selling of only VG1 is recommended.

Bundled Price- TYPE A VG1- $3, TYPE B VG2- $2, TYPE-C- VG1- $2, TYPE A VG2- $5, TYPE B- VG2- $1 and TYPE C- $1.5 (Gained by multiple of demand)

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