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Will the mixed bundling increase profits and why

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Reference no: EM132959475

You operate a Caribbean destination resort. You currently offer plans for a cruise departing from the resort and plans for a casino stay. It is expected that in 2021 there will be some return to more normal travel. You will re-launch your advertising for 2021 announcing that customers will be able to do both for one price. Your marginal cost per customer across both tours is $4800.

Customer Preferences

                                         Cruise                   Casino
Customer 1                       $7,000                  $3,000
Customer 2                     $2,000                      $6,000

You know that 33% of your customers will never bundle, 21% of your customers decline cruises because of seasickness and 12% decline the casino trip saying they don't believe in gambling.

Problem 1: Given the preferences distribution, will the mixed bundling increase profits? To support your answer, you must show your calculation of the net gain in profit, if any, with a mixed bundle strategy.

Reference no: EM132959475

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