What values of a bundling would be more profitable

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Reference no: EM13209320

Bundling is not always superior to offering (and pricing) items separately. Consider a telecommunications firm that offers both phone service and high-speed internet. It has two consumers (named Talker and Surfer) who differ in the willingness to pay a monthly fee for either service. The firm's marginal cost is zero for each service. Talker Surfer Phone $30 $a Internet $16 $24 Determine for what values of a bundling would be more profitable than not bundling (i.e. selling phone and internet separately). Consider all values of a from 0 to 100. Hint: For each potential value of a, the firm could have different optimal individual prices for phone and internet, and you need to figure out the profit level at these optimal prices. Different values of a can imply different subsets of the consumer population are served. Repeat the process for bundle prices and the profit generated at each a.

Reference no: EM13209320

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