Week 6 - Mixed Bundling - = 2(5 2 0.5) + (4.50 2) = 7.50...

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Mixed Bundling Example Burger Fries Bundle A 4 1 5 B 3 2 5 C 4.50 0 4.50 MC 2 0.5 Individual Prices Only P B = 3 and P F = 1 (exclude C from fries market) Π = 3(3 – 2) + 2(1 – 0.5) = 4 Pure Bundle P Bundle = 4.50 Π = 3(4.50 – 2 – 0.5) = 6 Mixed Bundle P Bundle = 5, P B = 4.50 and P F = 2.01 A and B will both choose the bundle; C will choose the burger only
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Unformatted text preview: = 2(5 2 0.5) + (4.50 2) = 7.50 Conclusion Pure bundling is superior to individual prices. Mixed bundling is superior to pure bundling. The intuition is that it is inefficient to sell a bundle to C because C values the fries at less than the cost of the fries....
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This note was uploaded on 01/03/2011 for the course COMM 290 taught by Professor Brian during the Winter '09 term at The University of British Columbia.

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