At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the twotypes of students because many students without early classes arrive early anyway (i.e., she cannot price-discriminate).CoffeeBananaStudents with Early Classes Students without Early Classes631057355The 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 itemor bundle.For simplicity, assume there is just one student with an early class, and one student without an early class.Price Strategy1. Mixed Bundling2. Price Separately3. Bundle OnlyRevenue from Pricing StrategyS$Cost from Pricing Strategy Profit from Pricing StrategyS5SPricing strategy yields the highest profit for the cafe owner.$$

Willingness to pay refers to the maximum amount of money that a consumer is willing to pay for a…

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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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