Question: The table below shows the valuation (the maximum price each customer is willing to spend on each product) of three potential buyers A, B and
The table below shows the valuation (the maximum price each customer is willing to spend on each product) of three potential buyers A, B and C of two new products (Product I & Product II) offered by a firm.
| Costumers | Product I | Product II |
| A | $500 | $250 |
| B | $400 | $150 |
| C | $50 | $400 |
Assume that the firm's costs are zero.
1. If the manager knows the valuations and identity of each customer, what is the optimal pricing strategy?
2. Now, assume that the manager does not know the identity of the customers. The manager adopts the following pricing strategy:
Buy each of the Product I and Product II for $400 each
OR
Buy the special package (Product I + Product II) for $550?
(i) How many customers will buy the special package? Explain!
(ii) How much profit will the firm earn with this pricing strategy? Explain
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