Concept explainers
To Explain: Whether A can price the technologically integrated bundle according to their wish, if A iPod played only iTunes and iTunes could be heard only on A iPod and if other electronic music could be played on an iPod, whether there are any limitations on the bundled pricing of iTunes and iPods.
Answer to Problem 1E
The limitation of pricing of the technologically integrated bundle of iPods and iTunes has been explained.
Explanation of Solution
The prices of the bundled products, like A iPods and iTunes, are on a higher side in the market, when compared to other similar products from competitive firms. The widely popular iTunes of A has a huge
If A adopts the strategy that iTunes can be heard only on A iPods, then the prices of the bundled product can be kept according to the way A wants it to be. However, the limitation would be that, this could decrease the sales of the product, as customers may look for alternative and competitive products. On the contrary if the other electronic music can also be heard in A iPods then A can bring down its prices, since demand and sales will increase.
Introduction: The process in which a set of goods or services are priced and marketed as a combined product is called bundled pricing.
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Chapter 16 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
- In 1896, Colgate dental cream was introduced in tubes similar to those we use now. Today, the Colgate-Palmolive Company’s brand of toothpaste is the best-selling toothpaste in the world (ahead of the Crest brand marketed by Procter & Gamble, which was introduced in 1955). While Colgate and Crest enjoy the lion’s share of the toothpaste market, if you view the oral care shelf at your local drugstore or supermarket, you will find over a hundred different varieties of toothpaste. Colgate alone sells over 40 different varieties that are marketed under names ranging from Shrek Bubble Fruit to Colgate Total Advanced Whitening. The high level of product differentiation in the toothpaste market stems from firms introducing new varieties in an attempt to boost their economic profits. In environments where makers of other brands (such as Crest) can easily enter profitable segments of the market, a profitable strategy is to attempt to quickly cover that segment (introducing Shrek Bubble Fruit…arrow_forwardIn 1896, Colgate dental cream was introduced in tubes similar to those we use now. Today, the Colgate-Palmolive Company’s brand of toothpaste is the best-selling toothpaste in the world (ahead of the Crest brand marketed by Procter & Gamble, which was introduced in 1955). While Colgate and Crest enjoy the lion’s share of the toothpaste market, if you view the oral care shelf at your local drugstore or supermarket, you will find over a hundred different varieties of toothpaste. Colgate alone sells over 40 different varieties that are marketed under names ranging from Shrek Bubble Fruit to Colgate Total Advanced Whitening. The high level of product differentiation in the toothpaste market stems from firms introducing new varieties in an attempt to boost their economic profits. In environments where makers of other brands (such as Crest) can easily enter profitable segments of the market, a profitable strategy is to attempt to quickly cover that segment (introducing Shrek Bubble…arrow_forwardThe information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $200,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero. 1. Assume there are two profit-maximizing digital cable TV companies operating in this market. Further assume that they are not able to collude on the price and quantity of premium digital channel subscriptions to sell, how many premium digital channel cable TV subscriptions will be sold altogether and what price will be charged when this market reaches a Nash equilibrium? 2. Under the conditions given in Question #3 of this problem, how much profit will each firm earn when this market reaches a Nash equilibrium? 3. What is the socially efficient level of digital premium channel subscriptions for this market and at what…arrow_forward
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