Bundling does not always help the monopolist. To see this, suppose that Comcast provides both phone...

 

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Bundling does not always help the monopolist. To see this, suppose that Comcast provides both phone and internet service to two types Туре А Туре В of custumers, with valuations Phone $30 Sa Internet $16 $24 Determine the values of a such that bundling is more profitable than not bundling. HINT: you need to tell me which strategy is more profitable for different ranges of a (e.g., 0< a < 9, a = 9,9 < a < 14, a > 14) where I have chosen 9 and 14 randomly. The textbook answer has five different ranges, where either pure bundling gives higher profits than selling separates, or vice-versa, or they are equal. 3. [also from Pepall et al.] Electrofax was an early supplier of equipment for making 'photocopies'. Thier machines required paper coated with wax film. Electrofax charged a low price for machines, but a high price for paper (4 cents per sheet, compared with a marginal cost of 1 cent). (a) Explain (in words) why Electrofax might have wanted to use this pricing policy as a monopolist. (b) Explain (in words) what actions Electrofax may have wanted to take when some independent firms tried to supply alternative papers to be used in Electrofax machines. Bundling does not always help the monopolist. To see this, suppose that Comcast provides both phone and internet service to two types Туре А Туре В of custumers, with valuations Phone $30 Sa Internet $16 $24 Determine the values of a such that bundling is more profitable than not bundling. HINT: you need to tell me which strategy is more profitable for different ranges of a (e.g., 0< a < 9, a = 9,9 < a < 14, a > 14) where I have chosen 9 and 14 randomly. The textbook answer has five different ranges, where either pure bundling gives higher profits than selling separates, or vice-versa, or they are equal. 3. [also from Pepall et al.] Electrofax was an early supplier of equipment for making 'photocopies'. Thier machines required paper coated with wax film. Electrofax charged a low price for machines, but a high price for paper (4 cents per sheet, compared with a marginal cost of 1 cent). (a) Explain (in words) why Electrofax might have wanted to use this pricing policy as a monopolist. (b) Explain (in words) what actions Electrofax may have wanted to take when some independent firms tried to supply alternative papers to be used in Electrofax machines.

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Part 1 Bundling will be profitable only if revenues are higher than an ... View the full answer