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3. A software maker (let's call it Microsoft) develops and sells two software packages. One is for producing documents (say, Word), the other is for
3. A software maker (let's call it Microsoft) develops and sells two software packages. One is for producing documents (say, Word), the other is for entering and manipulating data (Excel, duh). Suppose there are two equal-sized groups of consumers of software out there: writers, who are willing to pay $120 for Word and $40 for Excel, and data nerds, who are willing to pay $50 for Word and $150 for Excel. Because software is already developed, selling additional copies has zero marginal cost. (a) Microsoft would like to price discriminate; for example, charge writers more for Word than data geeks and vice versa with Excel. Why would this be difficult to do in practice? (b) If it sells each piece of software separately, what price should Microsoft set for Word and for Excel? (c) Suppose Microsoft bundles Word and Excel into a package called Office and does not sell them individually. What price should it charge for the bundle
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