The Acme Software Corp. has developed - at a cost of $500,000 - two software programs for computers: a word processor; and a spreadsheet.Acme's marketing department has determined that there are three categories of potential buyers of these programs - but there is no way of identifying an individual's category at the time of sale.The three categories, along with the numbers of (annual) buyers and the maximum willingness to pay (w.t.p.) of each group, are provided in the following table.Each category of buyer may buy none, only a single copy of one type of program, or single copies of both types of program.

Since this is software, the marginal costs of producing and selling (online) are zero.

Buyer category

Number of potential buyers

W.t.p. for word processor

W.t.p. for spreadsheet

Generalist

10,000

$60

$50

Sort-of geek

10,000

$50

$125

Super-geek

10,000

$25

$140

1.Acme currently sells the two programs separately.If Acme is maximizing its profits, what price is it charging for each program?Explain. (4 pts)

2.Acme's V.P. for Marketing - Ms. Lotta Sales - has hired you as a consultant to advise her as to whether there is a way for Acme to change its pricing, so as to increase its profits.Is there any specific advice that you can give her?Explain. (4 pts)

Mixed Bundling