Numerical Question:

1.Scammers Inc. has developed a new Immune Booster drink (IB) as well as a "cure" for Covid-19 based on Colloidal Silver (CS). As the product manager for the firm, you are responsible for setting the pricing policy for the new products. You are considering a bundled package that includes both products, and you assume the marginal cost of production is zero for planning purposes. You have identified four basic types of customers who may buy these new products, and their reservation prices for the two new products are provided in the following table:

Type

Immune Booster (IB)

Colloidal silver (CS)

A

$5

$18

B

$8

$11

C

$10

$9

D

$14

$3

a)Suppose you sell the two products separately, and each buyer is expected to purchase one unit of the product per week. Which price for IB and CS maximize weekly revenue? What is the weekly revenue equal to? (10)

b)If you offer the two products under a pure bundling strategy, what is the revenue maximizing bundle price? What is weekly sales revenue from the pure bundling scheme? (5)

c) What are your firm's profits if you charge $19 for a bundle containing one unit of IB

and one unit of CS but also sell the products separately at a price of $14 for IB and

$18 for CS (5)