Question
Suppose that a monopolist supplier imports and sells both protective masks and disposable gloves. All consumers want to purchase both items to protect against COVID-19,
Suppose that a monopolist supplier imports and sells both protective masks and disposable gloves. All consumers want to purchase both items to protect against COVID-19, but consumers disagree about which item offers more protection. The type A consumers believe that masks offer more protection, whereas Type B consumers believe that disposable gloves offer more protection. The table below provides the maximum willingness to pay for each good by each consumer type.
where WTPM denotes the maximum willingness to pay for a mask, and WTPG denotes the maximum willingness to pay for disposable gloves. To keep things simple, I am imposing the following assumptions:
There are no costs (i.e., revenue=profit),
There are equal numbers of consumers in each group (i.e., you can proceed by acting as if there were only one of each type).
And lastly, 5
a.Suppose that X=$10. If the monopolist does not bundle the two goods, what price does it charge for each. How much profit does it earn?
b.Suppose that X=$10. If the monopolist bundles the two goods, what price does it charge for that bundle. How much profit does it earn?
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