Scenario Bundling 1 : Konon Company produces both digital camera and photo print
ID: 1173471 • Letter: S
Question
Scenario Bundling 1 :
Konon Company produces both digital camera and photo printers. The marginal cost for a digital camera is 120 and the marginal cost for a photo printer is 80. There are four types of customers for Konon's digital camera and photo printers and their reservation prices are given in the table below.
Reservation
Prices
Camera
Printer
A
200
100
B
150
150
C
210
20
D
50
180
The possible pricing strategies are listed in the table below.
Prices
Camera
Printer
Bundle
(Camera + Printer)
Seperated Prices
140
100
--
Pure Bundling
--
--
230
Mixed Bundling
200
150
300
You can assume each consumer only need to buy 1 camera and 1 printer and they will purchase a product as long as the consumer surplus from purchasing the product is non-negative.
Refer to Scenario Bundling 1. Assuming there is only one customer of each type, which customer will only purchase a CAMERA if MIXED bundling is offered by Konon?
Hint: You need to figure out the purchase decision for each customer. Given the mixed bundling pricing, what will A buy, what will B buy, what will C buy and what will D buy? You need to perform the analysis in order to reach the correct answer.
Both A and B
Only A.
Only C.
Both C and D.
Reservation
Prices
Camera
Printer
A
200
100
B
150
150
C
210
20
D
50
180
Explanation / Answer
Mixed bundling at separate costs = 200 + 150 = 350 > mixed bundle price of 300.
We will need to combine reservation prices of each customer:
Customer A and B are willing to pay mixed bundle price of 300.
Customer C will buy the digital camera, since they value it at 210 or below and mixed bundling price of camera sold separately is 200 (210 > 200)
Customer D will only buy the photo printer (180 > 150)
Thus, Answer is (c) Only C.
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