Suppose you have three different types of consumers, with an equal number of consumers in each type, and three different related products available for sale. Assume the Marginal Costs for each item is as follows: DSLR and lens are each $300 with the camera bag is $20. Individuals are willing to buy if the individual valuations are equal to or more than the price for each product, or bundle of products, and the type of consumers are listed below.

Valuations placed on individual items

New User	Long-time User	Hobbyist
New DSLR Camera Body	1380	1500	600
Mid-level multipurpose lens	699	400	1101
Camera Bag	62	10	10

a. What is the highest profit and how many individuals purchase each item if the optimal price is set independently for each item?

b. What is the highest profit and how many individuals purchase each item if a pure bundling strategy is used where all three items are bundled together? (Hint: Add the values for the three items across the different consumers and consider the outcome if each of those prices is used.)

c. What is the highest profit and how many individuals purchase each item if a mixed bundling strategy is used where all three items are bundled together? (Hint: Take the different price bundle options from part b and evaluate what the optimal prices for each item separately are. Compare across all options and price combinations to see which has the highest profit.

Answer rating: 100% (QA)

a The camera bag will be the highest profit because it is the cheapest product and the fewest people buy it Therefore if you sell 10 of each item individually at 62 the total revenue would be 62 x 10 ... View the full answer