question archive You are a monopolist of two products, A and B
You are a monopolist of two products, A and B
Subject:EconomicsPrice: Bought3
You are a monopolist of two products, A and B. There are two types of consumers, Type 1 and Type 2. These two consumer types differ in their willingness to pay for A and B. You know that there are equal numbers of each type, but cannot identify specific individuals by their types. The following table gives their willingness to pay (WTP) for each product.
i. Assume zero marginal costs for each product. Is pure bundling more profitable than independent pricing? Prove it.
ii. Now, assume that the marginal cost of A is still zero, but the marginal cost of B is 3.5. Is pure bundling still the most profitable type of pricing, or is something else even more profitable? Prove your answer.
Product WTP Type 1 WTP Type 2
A 8 9
B 4 3
