Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

At a student cafe, there are equal numbers of two types of customers with the following values. The cafe owner cannot distinguish between the two

image text in transcribed
At a student cafe, there are equal numbers of two types of customers with the following values. The cafe owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (Le... she cannot prioe-discriminate}. Sludenls liiliurith Early Classes Studenls without Earlyr Classes Coffee 65 55 Banana 4? 9? The marginal oost of coffee is 1|] and the marginal cost of a banana is 40. The cafe' owner is considering three pricing strategies: 1. Mixed bundling: Price bundle of coffee and a banana for 153, orjust a ooFfee for 66. 2. Price separately: CIFfer coffee at 56, price a banana at 9?. 3. Bundle only: Coffee and a banana for 113. Do not offer goods separately. Assume that if the price of an item or bundle is no more than exactly equal to a student's willingness to pay, then the student will purchase the item or bundle. For simplicity, assume there is just one student with an early class, and one student without an early class. Price Strategy Revenue from Pricing Strategy Cost from Pricing Strategy Prot from Pricing Slrategy 1. Mixed Bundling 2. Price Separately 3. Bundle Only Pricing shategy 7 yields the highest prot for the caf owner

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Development Economics In The Twenty-First Century

Authors: Claudia Sunna, Davide Gualerzi

1st Edition

1317219961, 9781317219965

More Books

Students also viewed these Economics questions

Question

What is empire building in a managerial context?

Answered: 1 week ago

Question

8. What are the costs of collecting the information?

Answered: 1 week ago