Buyers of new cars shop for their preferred features - power seats, power steering, sunroof, ABS brakes and leather interior being a few examples. Several options combining some of these features are available from the dealership. Market research has identified three different types of consumers (roughly equal in proportion) based on survey data. The following schedule gives the reservation prices for the two most popular options at the dealership. Note that the options are mutually exclusive- i.e. the features offered in one option is not repeated in the other. Marginal cost of Option 1 is $2000 and Marginal Cost of Option 2 is $1000 For simplicity of calculation you can assume that there is one consumer per type. 1. Compare the profits from pure bundling, 2. Compare the profits from mixed bundling, and 3. Compare the profits for selling the options separately. Would your answer change if customer type 3 was 50% of the market?

See figure below and please show your steps .

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Customer Type Option 1 Option 2

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1 $6000 $5500

2 5500 4000

3 8500 1000