Bundling pricing for three types of consumers valuing differently for two goods and corresponding profits.
You are the manager of a firm that produces products X and Y at zero cost. You know that different types of consumers value your two products differently, but you are unable to identify these consumers individually at the time of the sale. In particular, you know there are three types of consumers (1,000 of each type) with the following valuations for the two products:
| Consumer Type |
Product X |
Product Y |
| 1 |
$60 |
$50 |
| 2 |
$50 |
$125 |
| 3 |
$25 |
$140 |
a) What are the firm's profits if you charge $25 for product X and $50 for product Y?
b) What are your profits if you charge $60 for product X and $140 for product Y?
c) What are your profits if you charge $110 for a bundle containing one unit of product X and one unit of product Y?
d) Illustrate what are your firm's profits if you charge $175 for a bundle containing one unit of X and one unit of Y, but also sell the products individually at a price of $60 for product X and $140 for product Y?