Question Suppose three consumers A, B, and C have the following reservation prices for two goods X and Y:

Reservation Prices for Good X and Y

Good X Good Y

Consumer A 5.33 8.00

Consumer B 12.00 3.00

Consumer C 3.00 11.00

Both Good X and Good Y costs $4 per unit to produce.

i) You have been asked to recommend a pricing policy (to maximize profits) for the two goods X and Y. You are to consider pricing separately, pure bundling, and mixed bundling. Without computations, what pricing policy from above would you recommend? Please explain why?

ii) For the pricing policy that you recommend above, please compute the optimal price(s) and the firm's profits. Confirm that the recommended pricing policy is indeed the best.