The publisher Elsevier uses mixed-bundling pricing strategy. The publisher sells
ID: 1203728 • Letter: T
Question
The publisher Elsevier uses mixed-bundling pricing strategy. The publisher sells a university access to a bundle of 931 of its journals for $1.7 million for one year. It also offers the journals separately at individual prices. Because Elsevier offers the journals online (with password access), universities can track how often their students and faculty access journals and then cancel those journals that are seldom read. Suppose that a publisher offers a university only three journals-A, B, and C-at the unbundled, individual annual subscription prices of p_A = $1,600, p_B = $800, and p_C = $1,500. Suppose a university's willingness to pay for each of the journals is upsilon_A = $2,000, upsilon_B = $1,100, and upsilon_C = $1,400. a. If the publisher offers the journals only at the individual subscription prices, to which journals does the university subscribe? b. Given these individual prices, what is the highest price that the university is willing to pay for the three journals bundled together? c. Now suppose that the publisher offers the same deal to a second university with willingness to upsilon_A = $1,800, upsilon_B = $100, and upsilon_C = $2,100. With the two universities, calculate the revenue-max'niizing individual and bundle prices. MExplanation / Answer
a) for individual subscription when willingness price is more than market price i.e A and B
b) given price for each , for bundle amount university is willing to pay price total of A ,B ,C i.e 2000+1100+1400=4500
c)second university is willing to pay only 1800+100+2100 =4000 for bundle.
individual prices A=1800, B=1100, C=1400
bundle price=4000
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