Consider a monopolist producing the products A & B. They have tow customers, customer 1 is willing to pay $100 for 1 unit of A and $50 for 4 units of B. Customer 2 is willing to pay $50 for 1 unit of A and 100 for 1 unit of B.

The demands are independent across customers and within customers across goods. Each customer will but either 1 or 0 units of each good. Assume the marginal cost of producing either good is 0.

Given the information, which strategy will be superior? No bundling or pure bundling. Explain.

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Solution This is a question about bundling which is a pricing strategy where a firm sells two or mor... View the full answer