Problem
Suppose the number of firms you compete with has recently increased. You estimated that as a result of the increased competition, the demand elasticity has increased from -2 to -3, i.e., you face more elastic demand. You are currently charging $10 for your product. If demand elasticity is -3, you should charge [x].
Explain the difference in the profit realized under the two situations (the price in each market or in the two markets combined.)
Should Time Warner bundle if everyone likes Showtime more than the History Channel, i.e., preferences are positively correlated?
Suppose Time Warner could sell Showtime for $9, and History channel for $8, while making Showtime-History bundle available for $13. Should it use mixed bundling. i.e., sells products both separately and as a bundle?