Consider Demand for two DVD's, let's call them Frozen and Iron Man. Demand for these DVD's...

  

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Consider Demand for two DVD's, let's call them Frozen and Iron Man. Demand for these DVD's varies across consumer groups A-D, with each willing to purchase at most one of each film. Reservation prices are shown in the table below. For each film, average costs are zero and marginal costs are $14 per firm. | - II Frozen Iron Man Bundle A 20 20 Consumer B 20 20 20 20 40 17.5 17.5 17.5 Answer the questions about prices, quantities and profits under different bundling strategies. I suggest you make a table for each case following the approach in class. a. What is the optimal price for each film under separate pricing? How many copies are Frozen and Iron Man are sold in total? What are firm profits? b. What is the optimal price with pure bundling? How many copies are Frozen and Iron Man are sold in total? What are firm profits? c. What is the optimal price for each film and film bundle under mixed bundling? How many copies are Frozen and Iron Man are sold in total, including those in the bundle? What are firm profits? d. Calculate total surplus under each pricing strategy. Which strategy is most profitable? Which is best for consumers? Consider Demand for two DVD's, let's call them Frozen and Iron Man. Demand for these DVD's varies across consumer groups A-D, with each willing to purchase at most one of each film. Reservation prices are shown in the table below. For each film, average costs are zero and marginal costs are $14 per firm. | - II Frozen Iron Man Bundle A 20 20 Consumer B 20 20 20 20 40 17.5 17.5 17.5 Answer the questions about prices, quantities and profits under different bundling strategies. I suggest you make a table for each case following the approach in class. a. What is the optimal price for each film under separate pricing? How many copies are Frozen and Iron Man are sold in total? What are firm profits? b. What is the optimal price with pure bundling? How many copies are Frozen and Iron Man are sold in total? What are firm profits? c. What is the optimal price for each film and film bundle under mixed bundling? How many copies are Frozen and Iron Man are sold in total, including those in the bundle? What are firm profits? d. Calculate total surplus under each pricing strategy. Which strategy is most profitable? Which is best for consumers?

Answer rating: 100% (QA)

a For separate pricing first lets see which is the income at each level price for Frozen DVDs If we set the price in 0 the 4 consumers buy the DVD and ... View the full answer