Suppose that a monopoly has developed software programs X and Y and is now facing the task to set the price for these software programs. Suppose that the marginal cost of these software programs is 0, but the cost of development of these software programs has been 50000 euros. The market research shows that there are two types of clients:

 * 50 type A clients, who are willing to pay maximum 1500 euros for software program X and maximum 2000 euros for software program Y.

 * 50 type B clients, who are willing to pay maximum 2500 euros for software program X and maximum 1200 euros for software program Y.

 Would it be more profitable for the monopoly to sell these software programs separately or as a bundle (let’s assume that price discrimination is not possible)? Justify your answer and provide calculations for proof.

Answer rating: 100% (QA)

To determine whether its more profitable for the monopoly to sell the software programs separately o... View the full answer