Assignment 10 - A Bunding Example Here's a simple numerical example that is meant to illustrate some of the problems associated with the textbooks bundling case we discussed earlier in the semester I will ask you to solve this as a purely bundling problem and find the optimal prices that the firm will choose, but then I also want to take this one step further and ask you to calculate the efficiency implications of this on the market. That means you will be asked to calculate the resulting consumer surplus and total market surplus that will result under each pricing regime So let's assume that 7 students are looking to purchase Economics and Accounting textbooks. Furthermore, let's assume they all have different valuations for these textbooks with some students willing to pay much more for Economies textbooks than for Accounting textbooks and vice-versa. There are a multitude of reasons why that might happen - for Instance students who major in a particular discipline are willing to pay more for the textbooks directly related to their majors. So let's assume the following valuations: Accounting Textbooks Economics Textbooks Student 1 120 10 Student 2 100 30 Student 3 90 70 Student 4 80 80 Students 60 90 Student 6 40 100 Student 7 10 120 Let's also assume that an Accounting textbook costs the bookstore $20 to procure and an Economics textbook costs $10. Assuming the bookstore is trying to maximize its profits, answer the following questions. Before you go ahead and say that universities are not for-profit organizations, you need to realize that a lot of services sold to students on our campus are actually subcontracted by the university to for-profit companies. The bookstore is actually Barnes and Noble, all the food courts are actually Aramarket Questions: 1. Assuming the bookstore is using individual pricing, what will be the prices chosen for Accounting and Economics textbooks, respectively? What will be the resulting profit, student surplus, and total surplus (profit student surplus)? 2. Assuming a pure bundling strategy, what will be the price of the bundle and the resulting profit, student surplus, and total surplus? 3. Assuming a mixes bundling strategy, what will be the price of the bundle, the price of the individually priced texbooks and the resulting profit, student surplus, and total surplus? 4. Contrast and compare between the 3 pricing options. Which option is the best for the bookstore, which option is the best for students, and which option is the best for the market overall 5. What would actually be the social optimum pricing that would maximise the total surplus)? osong Assignment 10 - Andling bample Here's a simple numerical example that is meant to stream of the problems associated with the textbooks binding case we discussed earlier in the will yed to solve this purely being problem and find the optimal that the firm will choose, but then I also want to take this one step further and ask you to all the efficiency inplications of this on the market. That means you will be weed to calculate the resulting consumer surplus and total market murpluit that will reader each pricing regime So let's sume that 7 students are looking to purchase in Accounting textbooks. Furthermore, let's assume they all have different valuations for these textbooks with some students willing to pay much more for Economistethos then for et textbooks and vice versa. There are a multitude of sons why that might happen for Instance Mudents who major in a particular discipline are willing to pay more for the textbooks directly related to their majors Sele's me the following valuation Tmi Tevher Student 1 120 10 Student 100 30 Student 3 90 70 Students RO Students 60 Student 40 100 Student 120 Let's also assume that an Accounting textbook costs the bookstore 520 to procure and an Economics textbook costs $10 Assuming the bookstore is trying to maximize its profiter the following question Before you go ahead and say that universities are not for-profit organisations, you need to realize that a lot of services sold to students on our campur are actually wabcontracted by the university to for-profit companies. The bookstore is actually are and Noble, all the food courts are actually Aramarket. Questions 1. Asuming the bookstore is using individual pricing what will be the prices chosen for Accounting and Economistethos, respectively? What will be the resulting profit, student surple, and total surplus profitestodent surplus? 2. Assuming a pure bundling strategy, what will be the price of the bude and the resulting profit, student surplus, and total surplus? 3. Assuming a mesbunding strate, what will be the price of the bundle, the price of the individually priced tebooks and the resulting profit de surplus and total surplus? 4 Catrast and compare between the pricing options. Which is the best for the bookstore, which option is the best for students and which is the best for the market overall 5. What would actually be the social optimum pricing (that was the total surplus! + Assignment 10 - A Bunding Example Here's a simple numerical example that is meant to illustrate some of the problems associated with the textbooks bundling case we discussed earlier in the semester I will ask you to solve this as a purely bundling problem and find the optimal prices that the firm will choose, but then I also want to take this one step further and ask you to calculate the efficiency implications of this on the market. That means you will be asked to calculate the resulting consumer surplus and total market surplus that will result under each pricing regime So let's assume that 7 students are looking to purchase Economics and Accounting textbooks. Furthermore, let's assume they all have different valuations for these textbooks with some students willing to pay much more for Economies textbooks than for Accounting textbooks and vice-versa. There are a multitude of reasons why that might happen - for Instance students who major in a particular discipline are willing to pay more for the textbooks directly related to their majors. So let's assume the following valuations: Accounting Textbooks Economics Textbooks Student 1 120 10 Student 2 100 30 Student 3 90 70 Student 4 80 80 Students 60 90 Student 6 40 100 Student 7 10 120 Let's also assume that an Accounting textbook costs the bookstore $20 to procure and an Economics textbook costs $10. Assuming the bookstore is trying to maximize its profits, answer the following questions. Before you go ahead and say that universities are not for-profit organizations, you need to realize that a lot of services sold to students on our campus are actually subcontracted by the university to for-profit companies. The bookstore is actually Barnes and Noble, all the food courts are actually Aramarket Questions: 1. Assuming the bookstore is using individual pricing, what will be the prices chosen for Accounting and Economics textbooks, respectively? What will be the resulting profit, student surplus, and total surplus (profit student surplus)? 2. Assuming a pure bundling strategy, what will be the price of the bundle and the resulting profit, student surplus, and total surplus? 3. Assuming a mixes bundling strategy, what will be the price of the bundle, the price of the individually priced texbooks and the resulting profit, student surplus, and total surplus? 4. Contrast and compare between the 3 pricing options. Which option is the best for the bookstore, which option is the best for students, and which option is the best for the market overall 5. What would actually be the social optimum pricing that would maximise the total surplus)? osong Assignment 10 - Andling bample Here's a simple numerical example that is meant to stream of the problems associated with the textbooks binding case we discussed earlier in the will yed to solve this purely being problem and find the optimal that the firm will choose, but then I also want to take this one step further and ask you to all the efficiency inplications of this on the market. That means you will be weed to calculate the resulting consumer surplus and total market murpluit that will reader each pricing regime So let's sume that 7 students are looking to purchase in Accounting textbooks. Furthermore, let's assume they all have different valuations for these textbooks with some students willing to pay much more for Economistethos then for et textbooks and vice versa. There are a multitude of sons why that might happen for Instance Mudents who major in a particular discipline are willing to pay more for the textbooks directly related to their majors Sele's me the following valuation Tmi Tevher Student 1 120 10 Student 100 30 Student 3 90 70 Students RO Students 60 Student 40 100 Student 120 Let's also assume that an Accounting textbook costs the bookstore 520 to procure and an Economics textbook costs $10 Assuming the bookstore is trying to maximize its profiter the following question Before you go ahead and say that universities are not for-profit organisations, you need to realize that a lot of services sold to students on our campur are actually wabcontracted by the university to for-profit companies. The bookstore is actually are and Noble, all the food courts are actually Aramarket. Questions 1. Asuming the bookstore is using individual pricing what will be the prices chosen for Accounting and Economistethos, respectively? What will be the resulting profit, student surple, and total surplus profitestodent surplus? 2. Assuming a pure bundling strategy, what will be the price of the bude and the resulting profit, student surplus, and total surplus? 3. Assuming a mesbunding strate, what will be the price of the bundle, the price of the individually priced tebooks and the resulting profit de surplus and total surplus? 4 Catrast and compare between the pricing options. Which is the best for the bookstore, which option is the best for students and which is the best for the market overall 5. What would actually be the social optimum pricing (that was the total surplus! +