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You are the monopoly seller of computers and monitors. Remarkably, the costs of production for both products are zero. You sell to a market consisting of two segments
(A and B). The RP of each segment for computers and monitors is shown in the table below.
 
Computer Monitor
A's RP $2000 $200
B's RP $1500 $300
 
There is an equal number in each segment (Let's assume there is one buyer in each segment). It is possible for a buyer to purchase one of the products and not the other. Also, note that you can only charge one price across different segments.
 
1. If you were selling computers and monitors separately, what price should you charge for each to maximize revenue?
2. If you were to bundle the computer and monitor together and sell only the bundle, what price should you set to maximize revenue?
3. Could you generate more revenue than in parts (1) and (2) through mixed bundling?
 

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Related questions

Suppose you are a manager of a firm that produces products X, Y and Z. You know that there are two different types of consumers, type 1 and type 2, who value your products differently. You also know that there 10,000 type1 consumers and 50,000 type 2 consumers with the following valuations for the three products:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Consumer Type Product X Product Y Product Z 1 $250 $150 $100 2 $200 $75 $250

(a) If you price each product separately (i.e., using a standard pricing strategy), what prices should you charge to maximize revenues and what are the revenues?

(b) If you adopt a first-degree price discrimination policy, what prices should you charge to maximize revenues and what are the revenues?

(c) If you use a commodity-bundle strategy such that the products are sold as one item (i.e., you market product X, product Y, and product Z together), what price should you charge to maximize revenues and what are the revenues?

You are a produce grocer who sells two products: apples and bananas (you sell them in bushels, but we’ll just consider a bushel to be one unit of fruit). Each costs you $1 per bushel wholesale, which is your only cost. You can prevent resale among your customers, of which there are three, each with unit inelastic demand. Consumer 1 has a willingness to pay of $2 per apple (bushel) and $8 per banana (bushel). For Consumer 2, the willingness to pay is $4 for apples and $6 for bananas. Consumer 3 would pay up to $9 for apples but only $1 for bananas.

A. Suppose you price apples and bananas separately. What is the profit-maximizing price for each?

B. What is the profit-maximizing price if you sell the two fruit as a pure bundle?

C. What leads to higher profits – selling separately or offering a pure bundle? Explain how this answer relates to the correlation in consumers’ willingness to pay across apples and bananas.

D. Can you do better by mixed bundling? Explain why or why not?

E. Does your answer to part (d) change if your production cost is $3 per unit instead?

Mia is the only seller of baskets to the people in this village. They purchase baskets according to the blue demand curve. Let's examine the sales revenue (which equals price times quantity) Mia would receive if she were to set the price somewhere in the range between 0 and 80 pesos per basket. You can assume she inherited a huge inventory of identical baskets. She sells all the baskets at the same price to all the villagers, knowing that if she gave any one person a big discount, he or she could turn around and resell at a higher price.
What price should Mia charge in order to maximize her total revenue?

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