Assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the item or bundle. For simplicity, assume there is just one student with an early class, and one student without an early class. Price Strategy 1. Mixed Bundling 2. Price Separately 3. Bundle Only Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy $ S S S S $ S S Pricing strategy yields the highest profit for the café owner.
Assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the item or bundle. For simplicity, assume there is just one student with an early class, and one student without an early class. Price Strategy 1. Mixed Bundling 2. Price Separately 3. Bundle Only Revenue from Pricing Strategy Cost from Pricing Strategy Profit from Pricing Strategy $ S S S S $ S S Pricing strategy yields the highest profit for the café owner.
Chapter8: Monopoly
Section: Chapter Questions
Problem 3SQP
Related questions
Question
![At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two
types of students because many students without early classes arrive early anyway (i.e., she cannot price-discriminate).
Coffee
Banana
Students with Early Classes Students without Early Classes
63
105
73
55
The marginal cost of coffee is 10 and the marginal cost of a banana is 40.
The cafe owner is considering three pricing strategies:
1. Mixed bundling: Price bundle of coffee and a banana for 168, or just a coffee for 73.)
2. Price separately: Offer coffee at 63, price a banana at 105.
3. Bundle only: Coffee and a banana for 128. Do not offer goods separately.
Assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the item
or bundle.
For simplicity, assume there is just one student with an early class, and one student without an early class.
Price Strategy
1. Mixed Bundling
2. Price Separately
3. Bundle Only
Revenue from Pricing Strategy
S
$
Cost from Pricing Strategy Profit from Pricing Strategy
S
5
S
Pricing strategy yields the highest profit for the cafe owner.
$
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fff933bb8-d158-4785-9e40-b62cd011e1eb%2F34df94ed-7280-449b-bccc-5552177a8ba5%2Fswo0b3e_processed.jpeg&w=3840&q=75)
Transcribed Image Text:At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two
types of students because many students without early classes arrive early anyway (i.e., she cannot price-discriminate).
Coffee
Banana
Students with Early Classes Students without Early Classes
63
105
73
55
The marginal cost of coffee is 10 and the marginal cost of a banana is 40.
The cafe owner is considering three pricing strategies:
1. Mixed bundling: Price bundle of coffee and a banana for 168, or just a coffee for 73.)
2. Price separately: Offer coffee at 63, price a banana at 105.
3. Bundle only: Coffee and a banana for 128. Do not offer goods separately.
Assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the item
or bundle.
For simplicity, assume there is just one student with an early class, and one student without an early class.
Price Strategy
1. Mixed Bundling
2. Price Separately
3. Bundle Only
Revenue from Pricing Strategy
S
$
Cost from Pricing Strategy Profit from Pricing Strategy
S
5
S
Pricing strategy yields the highest profit for the cafe owner.
$
$
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 3 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Survey Of Economics](https://www.bartleby.com/isbn_cover_images/9781337111522/9781337111522_smallCoverImage.gif)
![Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781337617383/9781337617383_smallCoverImage.gif)
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
![Survey Of Economics](https://www.bartleby.com/isbn_cover_images/9781337111522/9781337111522_smallCoverImage.gif)
![Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781337617383/9781337617383_smallCoverImage.gif)
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning