A firm that sells word processing and spreadsheet programs, with zero marginal a

Question

A firm that sells word processing and spreadsheet programs, with zero marginal and average cost, has four potential customers. The following table shows each customer's willingness to pay for each service and for a bundle. Consumer 1 Consumer 2 Consumer 3 Consumer 4 Word Processor $111 $41 $115 $14 Spreadsheet $41 $111 $14 $115 Bundle $152 $152 $129 $129 Show that the firm can earn more by using mixed bundling than by using pure bundling or charging separate prices for each service. Calculate the profit-maximizing separate service prices and the profit. If the firm charges separate prices, then the profit-maximizing prices are $ 111 for the word processor and $ 111 for the spreadsheet, and the corresponding profit for the firm is $ 444. (Enter numeric responses using integers.) Calculate the profit-maximizing pure bundle price and the profit. The profit-maximizing pure bundle price is $ 129, and the corresponding profit is $ 516 Calculate the profit-maximizing mixed bundling profit. The profit-maximizing prices for the mixed bundle are $ for the bundle, $for only the word processor, and $ for only the spreadsheet, for profit of S

Explanation / Answer

Consider the given problem here if the price of “mixed bundle” is “129”, => all the consumers will purchase it. So, here the price of mixed bundle should be “152”more than “129”, => only “consumer 1” and “consumer 2” will be able to purchase it. Now, if the price is “word processor” and “Spreadsheet” both have same price of “115”, => “consumer 3” will purchase “word processor” and “consumer 4” will purchase only “spreadsheet”. So, here total profit is given by, “152*2 + 115*2 = 534.

So, here the profit maximizing prices for the mixed bundle are “152” for the bundle, “115” for the word processor and “115” for only the spread sheet for profit of “534”.

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