Three consumers who want to buy a TV and a sound system have the following valuations for options offered by the store: (a) Assume that the dealer can charge only individual prices, one price for TV and one price for the Sound System. The goods are sold individually and are not bundled together, and any of the consumers may purchase either one or both goods separately. The store does not charge each consumer the price they are willing to pay but must charge the same price for all TV and the same price for all Sound Systems. What prices will the store charge for each item separately to maximize its total revenue from these three consumers, and what will be its total revenue? Please explain. Suppose that the store bundles TV and Sound Systems together and sells them as a bundle and does not sell them separately any longer. The consumers can no longer buy the goods separately, they will either have to buy a bundle containing both goods or buy nothing. The prices that the consumers are willing to pay for the bundle are gives in the above table. What bundle price will maximize the dealer’s revenue? Please explain. (c) Does bundling in (b) give higher revenues than selling individually in (a)?
Three consumers who want to buy a TV and a sound system have the following valuations for options offered by the store: (a) Assume that the dealer can charge only individual prices, one price for TV and one price for the Sound System. The goods are sold individually and are not bundled together, and any of the consumers may purchase either one or both goods separately. The store does not charge each consumer the price they are willing to pay but must charge the same price for all TV and the same price for all Sound Systems. What prices will the store charge for each item separately to maximize its total revenue from these three consumers, and what will be its total revenue? Please explain. Suppose that the store bundles TV and Sound Systems together and sells them as a bundle and does not sell them separately any longer. The consumers can no longer buy the goods separately, they will either have to buy a bundle containing both goods or buy nothing. The prices that the consumers are willing to pay for the bundle are gives in the above table. What bundle price will maximize the dealer’s revenue? Please explain. (c) Does bundling in (b) give higher revenues than selling individually in (a)?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Three consumers who want to buy a TV and a sound system have the following valuations for options offered by the store:
(a) Assume that the dealer can charge only individual prices, one price for TV and one price for the Sound System. The goods are sold individually and are not bundled together, and any of the consumers may purchase either one or both goods separately. The store does not charge each consumer the price they are willing to pay but must charge the same price for all TV and the same price for all Sound Systems. What prices will the store charge for each item separately to maximize its total revenue from these three consumers, and what will be its total revenue? Please explain.
- Suppose that the store bundles TV and Sound Systems together and sells them as a bundle and does not sell them separately any longer. The consumers can no longer buy the goods separately, they will either have to buy a bundle containing both goods or buy nothing. The prices that the consumers are willing to pay for the bundle are gives in the above table. What bundle price will maximize the dealer’s revenue? Please explain.
(c) Does bundling in (b) give higher revenues than selling individually in (a)?
Transcribed Image Text:Consumer 1
Consumer 2
Consumer 3
TV
$800
$1,000
$600
Sound System | Bundle
$100
$900
$50
$1,050
$150
$750
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