Question 3 In Ruritania, Oluplex is the dominant platform for selling internet advertising. It buys up space on the web pages of publishers (generic term for anyone with a web site that attracts eyeballs through content they provide) and resells to advertisers. There are two web sites that attract almost all Ruritanian eyeballs and they belong to competing newspapers. One is the Royal Clarion that is a fierce supporter of the monarchy and the present occupant of the throne, Rudolf V. The other is called Republic News that is in favor of abolishing the monarchy and owned by Rudolf V's half brother Michael, who is toasted in vinegar rather than wine. Oluplex is selling space on the landing page of the web sites of these two newspapers for a banner advertisement for a specified time period. There are three advertisers interested in this opportu- nity. The table below shows each advertiser's RP for each newspaper space as well as a bundle of both spaces. A's RP B's RP C's RP Clarion Republic Bundle $5.75 $10.25 $16.00 $12.25 $6.50 $18.75 $14.75 $14.75 $29.50 Page 3 Not For Distribution Beyond the Class 1. Suppose the Clarion and the Republic each charge Oluplex $2 per advertisement. If Oluplex sold each ad space separately, what price should it set on each to maximize its (Oluplex's) profit? 2. Suppose the Clarion and the Republic each charge Oluplex $2 per advertisement. If Oluplex offered the two ad spaces as a bundle only, what price should it, Oluplex, set on the bundle to maximize profit? 3. Suppose the Clarion and the Republic each charge Oluplex $2 per advertisement. Could Oluplex generate more profit through mixed bundling? If so, how should they price? Question 3 In Ruritania, Oluplex is the dominant platform for selling internet advertising. It buys up space on the web pages of publishers (generic term for anyone with a web site that attracts eyeballs through content they provide) and resells to advertisers. There are two web sites that attract almost all Ruritanian eyeballs and they belong to competing newspapers. One is the Royal Clarion that is a fierce supporter of the monarchy and the present occupant of the throne, Rudolf V. The other is called Republic News that is in favor of abolishing the monarchy and owned by Rudolf V's half brother Michael, who is toasted in vinegar rather than wine. Oluplex is selling space on the landing page of the web sites of these two newspapers for a banner advertisement for a specified time period. There are three advertisers interested in this opportu- nity. The table below shows each advertiser's RP for each newspaper space as well as a bundle of both spaces. A's RP B's RP C's RP Clarion Republic Bundle $5.75 $10.25 $16.00 $12.25 $6.50 $18.75 $14.75 $14.75 $29.50 Page 3 Not For Distribution Beyond the Class 1. Suppose the Clarion and the Republic each charge Oluplex $2 per advertisement. If Oluplex sold each ad space separately, what price should it set on each to maximize its (Oluplex's) profit? 2. Suppose the Clarion and the Republic each charge Oluplex $2 per advertisement. If Oluplex offered the two ad spaces as a bundle only, what price should it, Oluplex, set on the bundle to maximize profit? 3. Suppose the Clarion and the Republic each charge Oluplex $2 per advertisement. Could Oluplex generate more profit through mixed bundling? If so, how should they price
