A monopolist faces four consumers who all value two goods produced by the monopo

Question

A monopolist faces four consumers who all value two goods produced by the monopolist differently. In particular, each individual's willingness to pay for each product is:

1) Person 1 values good A at 40 dollars and good B at 20 dollars.

2) Person 2 values good A at 20 dollars and good B at 40 dollars.

3) Person 3 values good A at 60 dollars and good B at 5 dollars.

4) Person 4 values good A at 5 dollars and good B at 60 dollars.

For simplicity, assume the marginal cost of production for each good is zero.

a) Determine the optimal price and prot if the monopolist sells each good separately.

b) Determine the optimal price and prot if the monopolist bundles good A and B.

c) Suppose the monopolist can offer three different packages; a price for good A, a price for good B, and a price for goods A and B together. Determine the

optimal prices and profit.

d) Out of a), b), and c), what pricing strategy is optimal for the monopolist to employ?

Explanation / Answer

Ans;

1. 4) Person 4 values good A at 5 dollars and good B at 60 dollars.

2. c) Suppose the monopolist can offer three different packages; a price for good A, a price for good B, and a price for goods A and B together. Determine the

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