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Suppose you have three different types of consumers, with an equal number of consumers in each type, and three different related products available for sale.

  1. Suppose you have three different types of consumers, with an equal number of consumers in each type, and three different related products available for sale. Assume the Marginal Costs for each item is as follows: DSLR and lens are each $300 with the camera bag is $20. Individuals are willing to buy if the individual valuations are equal to or more than the price for each product, or bundle of products, and the type of consumers are listed below.

Valuations placed on individual items

New User

Long-time User

Hobbyist

New DSLR Camera Body

1380

1500

600

Mid-level multipurpose lens

699

400

1101

Camera Bag

62

10

10

  1. What is the highest profit and how many individuals purchase each item if the optimal price is set independently for each item?
  2. What is the highest profit and how many individuals purchase each item if a pure bundling strategy is used where all three items are bundled together? (Hint: Add the values for the three items across the different consumers and consider the outcome if each of those prices is used.)
  3. What is the highest profit and how many individuals purchase each item if a mixed bundling strategy is used where all three items are bundled together? (Hint: Take the different price bundle options from part b and evaluate what the optimal prices for each item separately are. Compare across all options and price combinations to see which has the highest profit.)

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