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Assume that a local bank sells two services, checking accounts and ATM card services. Mr. Donethat is willing to pay $8 a month for the
Assume that a local bank sells two services, checking accounts and ATM card services. Mr. Donethat is willing to pay $8 a month for the bank to service his checking account and $2 a month for unlimited use of his ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but is willing to pay $9 for unlimited use of her ATM card. To keep this example simple, assume that the bank can provide each of these services at zero marginal cost. How much additional profit does the bank make when it switches to use of a tying strategy to price checking account and ATM service? a. $14 b. $11 c. $7 d. $1
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