Assume for simplicity the marginal cost of production for laptops and printers i

Question

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 price 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 does it earn in total? To maximize profit using individual prices, the firm should charge a price for laptops and a price for printers of In turn, profit is it After conducting a costly study, an outside consultant claims that the company could make more money from its customers if it solid laptops and printers together as a bundle instead of separately. Id the consultant right? Assume that the firm has one customer of each type and that marginal cost is zero. How much does the firm earn in total from pure bundling? The profit-maximizing pure bundle price is turn, profit is it Why does bundling pay or not pay?

Explanation / Answer

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Since their is no marginal cost , So, Profit = Revenue

So, the firm will charge a price which maximizes the revenue

Revenue/profit, when price of Laptop is 850 = $1700

Revenue/profit, when price of Laptop is 950 = $950

Revenue/profit, when price of Laptop is 650 = 1950

So, Price of laptop will be $650

Revenue/profit, when price of printer is 100 = $200

Revenue/profit, when price of printer is 150 = $150

Revenue/profit, when price of printer is 50 = $150

So, price of printer = $100

Total Profit = $1950 + $200 = $2150

In case of Bundling

Revenue/profit, when price of bundle is $950 = $1900

Revenue/profit, when price of bundle is $1100 = $1100

Revenue/profit, when price of bundle is $700 = $2100

S0, Price of Bundle = $950

and Profit = $1900

Does n't Pay , positively correlated.

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