What is the optimal pure bundling price

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Reference no: EM13182109

Microsoft sells three different programs in their office suite: Word, Excel and PowerPoint. Each has a marginal cost of $15. There are three types of con- sumers, writers, accountants and professor, who have the following values for the three different programs:

Word Excel Powerpoint Writers 30 Accountants 20 Professors 25

Assume that there are 50 of each type.

(a) What is the optimal price for each program if Microsoft does not bundle? How much profit do they earn in total?

(b) What is the optimal pure bundling price?How much profit do they earnin total? (hint: if there is a tie, assume the firm wants to sell to more customers).

(c) What is the optimal mixed bundling strategy? How much profit do they earn in total? (hint: since there are 3 products, a mixed bundling strategy could include a bundle of three, bundle(s) of 2, and each product sold separately).

Reference no: EM13182109

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