Shaw Cable is a price searcher in the provision of cable TV. For the moment, assume that there are only two channels available on shaw: News and Sports. These channels are supplied with a positive fixed cost, but zero marginal cost. suppose also there are only two viewers: Tom and Eren. Tom loves sports, Eren loves news.

a. If Shaw charged separately for each channel, what prices would it set? b. If Shaw decided to bundle the two channels together, what price would it charge for the bundle? c. What would the consumer surplus be for each viewer, for both types of pricing? Is bundling a Pareto improvement over separate pricing? d. Suppose now that Matt joins the market, and he's willing to pay $100 for each channel. If Shaw still bundles, what happens to the price of the bundle? e. Will Shaw want to bundle or have separate pricing with Matt in the market? What does this tell you about the distribution of consumer types that generates bundle pricing? a. If Shaw charged separately for each channel, what prices would it set? b. If Shaw decided to bundle the two channels together, what price would it charge for the bundle? c. What would the consumer surplus be for each viewer, for both types of pricing? Is bundling a Pareto improvement over separate pricing? d. Suppose now that Matt joins the market, and he's willing to pay $100 for each channel. If Shaw still bundles, what happens to the price of the bundle? e. Will Shaw want to bundle or have separate pricing with Matt in the market? What does this tell you about the distribution of consumer types that generates bundle pricing