There are three types of consumers, whose have different willingness to pay (WTP) for Windows, IE and Netscape. There are 1 million consumers in each type. There is no marginal cost for producing Windows, IE or Netscape.

Consumers Type 1 Type 2 Type 3

WTP for Windows 50 50 50

WTP for IE 25 10 10

WTP for Netscape 10 25 38

a. What is the profit of Microsoft from Windows and IE if there is no bundling?

b. What is the profit of Microsoft if it bundle Windows and IE?

c. How does the bundling strategy of Microsoft affect the price charged by Netscape?