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Telephone companies offer a range of services and often bundle products for their customer's convenience. Consider the following example of a company called thstra. They
Telephone companies offer a range of services and often bundle products for their customer's convenience. Consider the following example of a company called thstra. They offer home phone and home internet services to their customers. They have four typical customers whose willingness to pay for each service is given in the table below. Willingness to pay (per month) Home Telephone Home Internet Vernon $20 $60 Maureen $30 $50 Vivian $50 $20 Alex $40 $40 gm has a constant monthly marginal cost of $5 for home telephone, while home int; me}: has a constant month y marginal cost of $10. These customers are considering joining gym for both home telephone and internet services. a) b) How much would sttga charge for home telephone and home internet if it sells these services separately and would like all possible customers to purchase both services? Assuming sttra signs up these 4 customers, what is their total producer surplus in this case? I What price should gm charge if they only offer home phone and internet services bundled together and they want all of these customers to sign up with them? Assuming again that 99%; signs up these 4 customers, what is their total producer surplus in this case? Suppose that Vivian gets a mobile phone and nds that a home phone service is not as important to her as it used to be. Her new willingness to pay for home telephone is now $20 per month. Explain whether the bundling strategy will benet 93%. What could 99m do to W m surplus
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