Quiz 24. Bundling Ans

Quiz 24. Bundling Ans - Shomu Banerjee ECON 201 BUNDLING...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Shomu Banerjee ECON 201 BUNDLING ANSWERS 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. Dull sells at $940 each. So profits on each sale is $940-$300 = $640. So overall profits from inclusive pure bundling is $64,000. (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
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

Quiz 24. Bundling Ans - Shomu Banerjee ECON 201 BUNDLING...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online