Quiz 24. Bundling

# Quiz 24. Bundling - of businessmen x Draw this on the graph...

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Shomu Banerjee ECON 201 BUNDLING QUIZ Dull Computers produces laptop computers (a high-quality good) for \$300 each, or desktop computers (a low-quality good) for \$200. There are 100 potential buyers each of whom will buy either one or none. Buyers are either businessmen (who value laptops at \$1200 and desktops at \$1000 each) or students (who value laptops at \$940 and desktops at \$800 each). Assume that if a buyer obtains the same consumer surplus from buying either good, the buyer will choose the higher-quality product. (a) Under pure bundling , Dull sells only laptops. What are Dull’s profits if he prices laptops so everyone buys (call this inclusive pure bundling )? Draw this on the graph on the next page. (b) If Dull decides on pure bundling but prices them so only businessmen buy (call this exclusive pure bundling ), what are his profits as a function of the number

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Unformatted text preview: of businessmen ( x )? Draw this on the graph on the next page. (c) If Dull decides on mixed bundling (i.e., produces both laptops and desktops), he would like to target the desktops to students and the laptops to businessmen. What will he charge for desktops and what will he charge for laptops? Explain your reasoning. (d) What are Dull’s profits under mixed bundling as a function of the number of businessmen ( x )? Draw this on the graph on the next page. Note: Profits are in thousands of dollars (e) Explain for approximately what values of x Dull will prefer what type of bundling. 10 20 30 40 50 60 70 80 90 100 2 6 10 14 18 22 26 30 34 38 42 46 50 54 58 62 66 70 74 78 82 86 90 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 x Profits...
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Quiz 24. Bundling - of businessmen x Draw this on the graph...

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