Question
A computer hardware firm sells both laptop computers and printers. It has a large inventory of laptops and printers that it wants to sell, so
A computer hardware firm sells both laptop computers and printers. It has a large inventory of laptops and printers that it wants to sell, so it has no variable cost of production. Through focus groups, their pricing team determines that they have an equal number of three types of customers, and that these customers'' reservation prices are as provided in the following Table Customer type Laptop Printer Bundle A $800 $100 $900 B $1,000 $50 $1,050 C $600 $150 $750 i. If the firm were to charge only individual prices (not use the bundle price), what prices should it set for laptops and printers to maximize profit? Assuming for simplicity that the firm has only one customer of each type, how much does it earn in total? ii. After conducting a costly study, an outside consultant suggests that the company could make more money from its customers if it sold laptops and printers together as a bundle instead of separately. Is the consultant correct? Assuming again that the firm has one customer of each type, how much does the firm earn in total from pure bundling? iii. Why does bundling pay or not pay? (Provide a general answer)
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