Architectural Digest and the New Yorker magazines are both published by Conde Nast. The first of these two magazines did well in the 1990s, but the New Yorker struggled with sales. For these kinds of magazines, subscriptions and newsstand sales are important, but advertising revenue is even more important. Lower sales of the New Yorker meant that advertisers were less willing to advertise, leaving the New Yorker in a difficult financial position. This problem studies one response by Conde Nast: an advertising bundling strategy that started in January 1999. Suppose there are two types of advertisers who would consider placing ads these two magazines, and suppose that there are equal numbers of each type of advertiser. The table below shows the reservation prices for each type of advertiser for each magazine. Suppose that the marginal cost to Conde Nast of placing an ad is $100.

Reservation Prices Advertiser 1 Advertiser 2 Architectural Digest $500 $800 New Yorker $250 $50