7.4 Suppose in Table 7.2 (Product Bundling) that the consumer user values Microsoft Word at $70 rather than $100. Keep all other valuations the same. Are there still obvious advantages from bundling the two products? Explain.

Microsoft Word Microsoft Excel Bundle Consumer $100 $50 $150 Professional $80 $90 sue Table 7.2 Product Bundling In this example. there are two types of customers. ordinary consumers and professionals. The table shows the res- ervation prices for Microsoft's Word and Excel programs. The reservation price for the bundle for any consumer Is the sum of the reservation prices for the individual products If the rm wants to sell both products to both types of customers pricing them separately. it must price the products at $80 and $50. respectively (the minimum reserva- tion prices for each product]. It collects $130 from each customer. It can do better by selling the products In a bundle for a price of $150 {the minimum reservation price for the bundle), Bundling increases prots In this example because the two groups have opposite relative valuations of the two products. Professionals are willing to pay more for Excei than consumers. while the opposite holds for Word. Thus. the minimum reservation price for the bundle is greater than the sum of the minimum reservation prices for the separate products