You help couples book their perfect honeymoon. You currently offer plans for a cruise and for a casino stay. Your sale manager is getting her MBA and has suggested you might consider bundling as a way to boost profits.

a) Here are the customer preferences and your cost are $100 for the first booking and $50 for each additional booking. Compare the profit with and without bundling. Which strategy should be used? Show your calculations.

cruise casino

customer 1 7,000 3,000

customer 2 2,000 6,000

b) The sales manager also suggests that there is a possibility that some customers will never bundle. She says in some cases it might be possible to bundle and also offer each customer only the trip they prefer, a practice known as mixed bundling. You know that about 21% of your customers decline cruises because of sea sickness. At least 12% decline the casino trip saying they don't believe in gambling. As a rough estimate you initially estimate that approximately 33% of your customers will never bundle. Will mixed bundling increase profits? You must show that calculations that support your conclusion.